Jakarta's property values are expected to rise by about 50 percent if the government revises its regulation on foreign nationals' right to own property, an analyst predicts.
The government is looking into extending property usage rights by foreign nationals from 25 years, with two extensions of 20 and 25 years possible, to a straight 70-year contract, but still is holding back on letting foreign nationals own property outright.
"After the new regulation is passed, property values will surely rise," Siswanto Widjaja, CEO of property consultant firm PT Procon Indah, said.
He said Indonesia's property market was very attractive to foreigners since it was valued lower than comparable properties in neighboring countries.
"Jakarta property is valued at only about one-tenth of the property values in Singapore or Hong Kong. Property values will easily increase by 50 percent," he said.
He said this would in turn entice foreigners to invest.
"Properties in prime areas, especially for the high-end market, will be popular. They (foreigners) can buy hundreds of units for investment, which will drive up the price per apartment," he said.
"Land values usually make up about 40 percent of the selling price. So if the value of the land rises, automatically the selling price will too," he added.
Bank Indonesia's Residential Price Survey showed a 3 percent increase in the price index of Jakarta property in the first half of 2008, driven by higher material costs and fuel prices. The bank expected the trend to continue in the third quarter.
Public Housing Minister Muhammad Yusuf Asy'ari said the new regulation on property ownership aimed to make the property market more attractive to investors, as reported by Bisnis Indonesia daily last month.
The ministry has been working with the National Land Agency to drafting the regulation with input from the Indonesian Real Estate Developers Association. It is scheduled to go into effect by the end of 2008 or by early 2009 at the latest.
The government, he said, would regulate what proportion foreign buyers might buy, and which types of properties.
Wira Agus, a senior manager at the consulting firm PT Property Advisory Indonesia, said it was still too early to predict demand as foreigners have acquired properties through various means, including by leasing long-term from locals or by establishing a local company with the right to buy.
The housing supply in Jakarta is not meeting current needs.
Anton Sitorus, senior manager of research with the property management and investment firm Jones Lang LaSalle, said last year only 30,000 residential units came on the market in Jakarta, but current demand required an additional 700,000 units.
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