Okay for home or investment

Burhanuddin Abe, Contributor, Jakarta

For some Indonesians, lifestyle has changed considerably, including their preference for homes. For quite some years now, living in apartments is the ultimate choice.

Just look at the skies of several major cities here, especially Jakarta, and you will find more and more skyscrapers filling the landscape.

And, they are not only office buildings, but residential apartments. Even the neighboring towns, Bekasi and Tangerang, are also the proud locations of these new high-rise residences. Currently, 35 new apartment buildings are in development in Jakarta as well as its outskirts.

The number of major developers are also growing in this lucrative business, such as Artha Graha, Duta Pertiwi, Sumarecon Agung, Agung Podomoro, Megapolitan, Gapuran Prima and many others besides. Naturally, the competition is becoming tougher in providing customers with as many plus points as possible, like complete facilities, strategic location, tight security and the architectural aspect.

According to data recorded by the Indonesian Center of Property Studies (PSPI), while the 1980-1998 period saw only the development of 25,000 apartments, about 40,000 have entered the market ever since. This is simply the answer to those who demand efficient, modern and private homes, in or close to the center of the city, just like those who have been used to living in apartments in Hong Kong, Singapore, Malaysia and so forth. Their reasons, though, may not be entirely similar to their counterparts in Indonesia.

Like in the ownership of any product category, prestige being one reason behind the purchase, super modern, luxurious apartments are also selling well, for example, Bellagio, Da Vinci, Four Seasons, Casablanca, Radiance and SCBD Suites, just to name a few that offer superior features.

Panangian Simanungkalit, the property consultant of Panangian Consulting Group, said that both the high-end and middle-class apartments are enjoying robust sales. The high-end apartments (sold at approximately Rp 15 million or US$ 1,600 per square meter) are only 15 percent of the total, while those priced at between Rp 4 million and Rp 7 million comprise 35 percent and the rest cost less.

Many developers, including their marketing agents and property brokers, are even enjoying a high rate of presales prior to the readiness of the luxury homes.

The soaring sales can be illustrated by the following examples. Casablanca has sold 75 percent of its apartments, while the remaining units are leased as serviced apartments. Setiabudi Apartments, according to its sales agent Century 21, are almost sold out, while Taman Rasuna Apartments, the pioneer of lower priced apartments sold for between Rp 400 million and Rp 500 million per unit, has only 100 units left from its total 3,000. The largest number of the 3,000 have been sold and occupied by the owners, while a small percentage is rented.

Bakrie Group, the developer of Taman Rasuna Apartments, plans to add 450 apartments, which are near completion. The company feels optimistic about the future of apartments here, because, among other reasons, people buy them for investment and business. "Just imagine the huge profit, as they buy it for Rp 400 million on a bank loan (a home-purchase-scheme) and they rent it out for Rp 7 million per month. The return is higher than putting your money in a bank deposit," said one owner of Taman Rasuna.

Will apartments replace hotels in certain aspects? Not according to Panangian Simanungkalit, who thinks they are not directly comparable and each has its own plus points as well as functions.

While for long-term rent, like two or three months or longer, apartments prove to be more economical, as the amount paid for one month for a room in a star-rated hotel can get you a luxury apartment for three months. And, today, though five-star hotels generally have state-of-the-art facilities, the luxury apartments do not lack them either.

On the occupancy rate, apartments here are currently enjoying a higher level than hotels. The Statistics Office of Property and Real Sector recorded that in February, 2004 the occupancy rate of leased apartments was 76.34 percent, while that of star-rated hotels in Jakarta and the surrounding cities (Bogor, Tangerang and Bekasi) was 60.1 percent in the same month.

Out of the star-rated hotels, only those with a three-star rating enjoyed a slightly higher percentage, 70.3 percent. The four-star hotels had 63.3 percent, while the lowest percentage, 51.5 percent, belonged to the five-star ones. The figure mentioned earlier, 60.1 percent, is the average occupancy rate of star-rated hotels.

The office also recorded the average price of leasing an apartment in February was Rp 91,727 per square meter per month, which has gone down by 10.9 percent from the previous month. The sales price of strata-titled apartments, meanwhile, rose in February by 4.16 percent to Rp 7.3 million per square meter from Rp 6.9 million previously.

The average room rate of a three-star hotel room is Rp 230,805 per night, while a four-star hotel room is Rp 329,938 and the five-star one is Rp 534,132. The increase of room rates at star- rated hotels over the past few years is about 0.58 percent.

Panangian Simanungkalit also said that there is no significant increase in the building of new hotels in the country. Developers, according to him, seem to prefer to put their money in more lucrative property sectors, such as apartment buildings and huge trade centers, like those which are dubbed here as "international trade centers". To them investments in hotels are not quick yielding as it takes eight or 10 years, or even more to reap any profit. Comparatively, apartments take only three years at the most.