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.