Property sector may stay sluggish until December

JAKARTA (JP): Indonesia's ailing property sector has not shown any positive sign of recovery and will continue to be sluggish until the end of the year, property research agency The Burwood Report Indonesia has said.

The monetary crisis, which has hit Southeast Asia since early July, has greatly destroyed the country's property sector, resulting in decreasing sales and forcing many developers out of business.

Burwood predicted that total investment in the property sector this year would only reach Rp 14.44 trillion (US$1.7 billion), 50 percent of its initial target of Rp 30 trillion.

"Indonesia's property sector will remain sluggish this year because demand from local consumers will continue to decline," Burwood said.

Burwood's research shows that monthly investment in the property sector showed a decreasing trend since July. It drop to below Rp 1 trillion per month in the past three months, from an average of Rp 3 trillion to Rp 4 trillion before the currency crisis hit the country.

Property investment in July reached Rp 3.08 trillion, Rp 2.7 trillion in August, Rp 983 billion in September, Rp 1.22 trillion in October, Rp 1.18 trillion in November, and Rp 1.04 trillion in December.

In the first three months of 1998, property investment was recorded below Rp 1 trillion per month. It reached Rp 909 billion in January, Rp 853 billion in February and Rp 650 billion in March.

The property sector has been the worst hit by the economic turmoil, which has seen the rupiah plunge to as low as Rp 17,000 to the dollar from Rp 2,400 in July. Currently, the rupiah is traded at about 8,500.

The plunging currency has made it impossible for companies to service their unhedged overseas loans.

Foreign investors have, so far, shown no interest in the property sector, especially in the office, apartment, retail and residential subsectors due to the various constraints.

Many developers have stopped operations, and others have switched to other sectors.

Burwood said it would be difficult to develop big projects in the coming two years because the weak purchasing powers of local consumers could not be encouraged in the short-term. (gis)