Property players to slow down expansion
Anissa S. Febrina, The Jakarta Post, Jakarta
Setbacks in the domestic economy recently -- triggered by higher key interest rates set by the central bank and higher fuel prices -- have prompted property developers to slow down expansion, focusing on this year's ongoing projects and reviewing next year's plans.
"We are calming down after a massive expansion these past couple of years. We will review our planned projects in accordance with the economic situation," said Agung Podomoro Group marketing director Indra W. Antono last week.
Concentrating on middle-upper class property developments in the capital, Agung Podomoro Group is currently working on nine projects, mostly commercial centers and apartments such as the Jakarta City Center, Senayan City, The Pakubuwono Residence and CBD Pluit.
Although the company had four more projects on its 2006 list, Indra said, it was likely to be delayed as their current projects are nearing completion and would add to next year's supply.
Established developer Ciputra, which choose to concentrate on real estate, would continue expansion less aggressively than it did this year, said Ciputra Surya director Harun Hajadi.
"We make fewer developments although the demand for housing is still high," he said, adding that the company plans to invest next year a slightly lower amount as compared to its Rp 400 billion investment in 2005. The company invested Rp 800 billion in 2004.
This year, it is still completing its high-class resort development of Taman Dayu in East Java and several middle-lower compounds in Greater Jakarta.
The domestic property market has been experiencing a boom since 2002 with market capitalization more than doubling from Rp 26.6 trillion (US$2.65 billion) to Rp 56.1 trillion as of September 2005.
Property analyst Panangian Simanungkalit from the Center of Indonesian Property Studies (CIPS) suggested that developers be more careful and responsive in reading market demand.
With exchange rates fluctuating and the inflation rate predicted to soar to 12 percent until the year-end, buying property might be the safest way to invest nowadays, he added.
The value of upper class apartment units in prime locations such as Jl. HR Rasuna Said, South Jakarta, and Jl. Jend. Sudirman, Central Jakarta, for example, will grow by an average of 20 percent annually. By comparison, the yearly interest of savings and deposits sits at between 12 percent and 15 percent.
Panangian said 65 percent of upper class property ended up in the hands of investors.
However, the highest demand would still be for housing in the middle to lower market. Since the latter are experiencing financing difficulties, Panangian suggested that developers cooperate with the banking sector in providing longer lending periods.
"It has been done in Thailand and Malaysia, it should be feasible here," he said.