Property market remains weak

Debbie A. Lubis, The Jakarta Post, Jakarta

Property consultant PT Procon Indah said on Thursday that property demand in Jakarta would remain modest despite the current appreciation in the rupiah and a declining interest rate.

But "should the improving market sentiment in the early (part) of the year continue, an upside potential in the medium term may exist," Procon said in its quarterly property market report.

Since the beginning of the year, the rupiah has seen an upward trend as the country's political situation has improved, with progress in economic reform programs -- including the recent sale of government shares in Bank Central Asia.

The interest rate has also started to ease down as Bank Indonesia has allowed its benchmark rate to go down by nearly 18 percent late last year, to around 16.70 percent now. A lower interest environment would make bank lending cheaper.

Procon noted that sectors relying on foreign investment such as industrial estate, rental office, and rental apartment still experienced weak demand as a healthy level of foreign investment has yet to return to the country.

"The slow demand in the retail sector, however, was still caused by the limited availability of space in good quality (shopping) centers," it said.

It said that, with such a weak demand, there was no new supply during the first quarter of this year.

But it added that projects under construction were progressing on time, and were expected to enter the market on schedule.

Procon observed that change in rental prices in most sectors were largely due to the strengthening rupiah against the dollar during the first quarter.

Procon said that the recent flooding had a negligible effect on the property market, because only the rental apartment sector experienced a short-term increase in absorbing displaced flood victims and relocating them to rental accommodation.

The company added that there were no actual sale deals from some industrial estates, although they received more inquiries than usual from flooded industrial zones.

Procon noted that, during the first quarter of this year, condominium prices were relatively stable, with only few preferred projects increasing sale prices.

It predicted that future availability in rental apartments would generally come from condominium units offered for lease, while strata-title retail centers will continue to generate a strong presence in future retail supply.

The company observed no fluctuation in prices for industrial land after having declined slightly, although the buying up of industrial land this quarter was higher than the same period last year.