'Property market weak in Q2'

The Jakarta Post, Jakarta

Demand for property in Jakarta during the second quarter (Q2) of this year remained weak despite improvement in the country's macroeconomic condition, property consultant PT Procon Indah said.

Continuing negative sentiment among foreign investors in the country had impeded demand for property, the firm said in its quarterly property market review, released on Friday.

Foreign direct investment (FDI) in the first five months of the year plunged by nearly 60 percent to US$1.67 billion, compared with the same period last year.

Security problems, labor conflicts and a weak legal system have discouraged foreign investors from returning to the country.

The report said that demand during the period was mainly focused on the office and industrial estate sectors.

It said that demand for offices to rent was relatively stable, with low positive net take-up during Q2. But average occupancy rates decreased slightly to 77.6 percent, from 77.9 percent in Q1.

Approximately 663,000 square meters of office space in the central business district are currently vacant, mostly in newly completed buildings and in some older office buildings.

Apartments to rent experienced a decline in net take-up during Q2, from 143 units absorbed in the first quarter to 125 in the second.

However, there was a slight increase in the occupancy level of rental apartments from 60.8 percent to 61.6 percent, leaving an estimated 5,640 units vacant.

Procon said that during Q2 new supply was dominated by the retail sector, which recorded an additional 114,000 square meters of retail space.

The office sector saw an additional supply of 30,000 square meters following the completion of Menara Danamon.

Future supply in rental apartments will come mostly from condominium units offered for lease and the completion of Pondok Indah Golf Apartment Tower II.

Procon observed that changes in rental rates in most sectors were due largely to the strengthening of the rupiah against the dollar during Q1.

The company also predicted that short-term supply would be dominated by the development of retail centers and middle-class condominium projects offering competitive prices.