Property market remains bleak
By I. Christianto
There are no promising signs yet that there is even a slow recovery in the property and real estate sector. Meanwhile, in the stock market, concerns over weak consumer demand has dragged down property and real estate heavyweights.
JAKARTA (JP): Market analyst Yenny Fadjar of PT Harita Kencana Securities said the property sector had been generally stagnant.
"Since 1998, the sector has been stagnant. This is partly due to our weak banking sector. Since the banking sector hasn't recovered, the property sector will not be able to recover either," she said.
She said in the stock market, the property and real estate heavyweights had been dragged down by plans to reduce government subsidies for low-cost houses (36-square-meter and below).
"Though there's is also a plan for nonbudgetary subsidies for low-cost housing projects, the issue will affect the overall development of and demand for the property sector," she said.
This shows the economy will continue to struggle with shrinking demands and negative consumer sentiments, she said.
She said the recent increase in fuel prices had also affected the property and real estate sector.
"Many developers are facing difficulties completing their projects. The fuel price increase will significantly affect the price of raw material. The cost of the projects will then increase," she said.
However, she added, the prospects for primary and secondary houses would be better as the demand for them was still high.
The property and real estate shares traded at the Jakarta Stock Exchange (JSX) last week were stagnant. However, there was selected buying for short trading based on speculation.
"Speculation is the only way under the present circumstances," said Yenny.
Last week, out of 31 property and real estate companies listed on the JSX, 19 gained, one suffered a loss and the remaining were stagnant. The speculation during the week raised the property and real estate index on the JSX to 24.917 by last Friday, compared to 23.52 on June 15. On June 22, the JSX Composite Index closed at 437.59, slightly higher than the 435.21 the previous day.
Yenny said she would not recommend buying property and real estate shares.
However, there are still some shares that frequently traded with good volumes such as PT Kridaperdana Indahgraha, PT Kawasan Industri Jababeka, PT Ciputra Development and PT Suryainti Permata, she said.
The others include PT Jakarta International Hotels and Development (JIHD), PT Duta Pertiwi and PT Ciptojaya Kontrindoreksa, she added.
"This sector will be stagnant at least until 2002. But if there's no recovery in the banking sector, the property and real estate sector will continue to suffer," she said.
Loss
By Friday, among the top 20 losers, three were property and real estate companies, including Jababeka, PT Dharmala Intiland and PT Duta Pertiwi.
There was only one property and real estate player, Kridaperdana, among the top gainers.
In a related development, Jababeka reported a total loss of Rp 1.9 trillion in 2000, a further loss of 260 percent compared to its Rp 549.52 billion loss in 1999.
Last year, Jababeka's saw Rp 146 billion and Rp 23 billion in sales and operational profits, respectively, the company's president Budianto Liman said as quoted by Bisnis Indonesia.
The company suffered the huge loss due to a drop in its total asset value to Rp 2.6 trillion from Rp 3.5 trillion in 1999. Its liabilities also increased to Rp 3 trillion from 2.3 trillion in 1999 due to currency conversion of its loan. There was also an interest of Rp 210 billion in 2000.
Jababeka is the developer of the Cikarang industrial estate in Cikarang, east of here.
JIHD reported to its shareholders on Friday a total loss of Rp 347.8 billion in 2000. The company saw a profit of Rp 3.9 billion in 1999.
JIHD, which owns the five-star Hotel Borobudur in Central Jakarta, said the significant loss was due to the depreciation of rupiah exchange rate against the greenback from Rp 7,100 in 1999 to Rp 9,595 in 2000. The loss from the exchange rate amounted to Rp 794.2 billion. There was also a significant increase in interest to be paid from Rp 166.1 billion in 1999 to Rp 266.1 billion in 2000.
The company admitted that the real estate sector had not shown any prospective movement.
"Though there were some improvement in small scale residential and shop house development projects, there were still many external factors such as political uncertainties, lack of foreign investment, tight money policy, volatility in the rupiah exchange rate and low demand which affected major development, said JIHD's president Jusuf Indradewa.
Hotel Borobudur, actually, saw an increase of 47.7 percent in revenue last year, while its occupancy rate and gross operating profit surged by 10.6 percent and 195 percent, respectively, he said.
New projects
The gloomy state of the stock market, and the property and real estate sector in general have not hindered the players from developing new strategies to survive.
A private company based in Surabaya, PT Lamicitra Nusantara, will launch its initial public offering (IPO) next month at the JSX and Surabaya Stock Exchange.
Lamicitra runs the largest retails in Surabaya, Jembatan Merah Plaza and Jembatan Merah Shop-house. The company also has some subsidiaries running hotels, container parks and housing complexes. The company earned a Rp 9.14 billion profit in 2000, an increase from its Rp 8.43 billion profit in 1999.
Yenny said there were reasons why companies launched IPOs, especially under this unpromising conditions.
"The company can gain funds from an IPO, and therefore use it to develop new projects. In the case of Lamicitra, it has promising projects," she said.
New projects are also in the pipeline for publicly listed PT Lippo Cikarang, which operates an industrial zone in Cikarang.
The company will soon develop a new 150-hectare industrial zone called the Delta Silicon 2. Lippo currently runs the 270- hectare Delta Silicon 1.
The director of industrial and commercial sales and investment of property consultant Colliers Jardine, Riko Perlambang, said, "It's hard to believe that a company would dare to develop a new industrial area in a such a hard time, when there is a lack of foreign investors interested in investing in the manufacturing sector in Indonesia," he said.
Lippo Cikarang plans to offer Delta Silicon 2, whose development will begin next month, at US$45 per square meter. The rate is US$60 per square meter at Delta Silicon 1.
"Developers have a trick. They peg the rupiah to the US dollar at a certain exchange rate, but we never know what the conversion rate is.
So they can set very competitive rates. A price war then takes place," Riko said.
In addition to the new industrial zone, Lippo Cikarang will also develop a new housing complex called Orchard Hill, which is designed in the American style. The price of the units range between Rp 200 million and Rp 220 million each.