Property prices rise following fuel prices

Property prices rise following fuel prices

Anissa S. Febrina , The Jakarta Post, Jakarta

Those wishing to invest in property better make up their mind
now, as developers have started raising their prices after the
recent fuel price hike, with the upward trend of property prices
likely to continue.

"We have to raise our prices by at least 10 percent," said
developer Summarecon Agung corporate secretary Johanes Mardjuki,
adding that his company would come up with its final calculation
in the next 10 to 14 days.

Johanes explained that a 30 percent increase in fuel prices --
which has driven transportation and production costs up -- would
raise property prices by roughly 5 percent. Although he was quick
to add that "a 100 percent fuel prices hike does not necessarily
equal a 15 percent jump in property prices".

The government, under pressure to avoid fiscal disaster amid
an inflated fuel subsidy, increased on Oct. 1 domestic fuel
prices by an average of 126 percent.

Other developers seemed to have made their adjustments as
several marketing officers in the Property Expo in the Jakarta
Convention Center reported that the prices of their property had
gone up a week before the fuel price hike was made official.

Ciputra group increased the prices of their houses in housing
estates from between 5 percent to 10 percent as of Oct. 1.

"However, different companies under Ciputra take a different
approach in adjusting with the fuel price hike," said Abud
Budiman, a marketing executive from the firm.

"This is only the first phase of adjustment as the prices of
building materials go up every two days now," said Juarman
Widyasana from Jaya Property.

In spite of that, the demand for property in the upper end of
the market, including apartments, retail spaces and housing,
remains stable. Some renowned developers have even seen an
increase of between 10 percent and 30 percent in their sales last
month as compared to the previous month.

"People, especially investors, wanted to buy the property
before the prices went up. It was a normal reaction, especially
because the news of fuel prices hike has been around for quite
some time," said Johanes.

Meanwhile, for investors, apartments are still their first
option as their value increases rapidly in less than a year.

An upper end apartment in central business district (CBD)
area, for example, which was sold at Rp 650 million (US$64,356)
in 2004 is now worth Rp 800 million.

"It depends on the location, of course," said Hermon
Simanjuntak from Bakrie Swasakti Utama, developer of apartment
blocks in Kuningan, South Jakarta.

While the top-end market property saw a blessing in disguise
in the fuel price hike, developers of the middle to lower end of
the market experienced the opposite as their sales went down by
30 percent last month.

"People who buy houses in the middle to lower end of the
market are not investors and they have limited financing
ability," said Juarman. "They also take into consideration the
increase in the interest rate."

With yearly interest rate already ranging from 14 percent to
17 percent on property loans, people are now bracing for higher
interest rates to come following Bank Indonesia's recent decision
to sharply increase its reference rate by 1 percent to 11
percent.

"Another increase in interest rate would mean an increase in
price as well," Juarman added.