Real estate body cuts housing sales forecast

Real estate body cuts housing sales forecast

Indonesia's real estate association cut its forecast for new home sales this year by as much as 20 percent because higher fuel costs slowed demand for houses.

The Indonesian Real Estate Developers Association reduced its forecast to as low as 80,000 homes from the previous estimate of 100,000, said Lukman Purnomosidi, chairman of the association.

The inflation rate in Southeast Asia's biggest economy probably remained near a six-year high in November after the government more than doubled fuel prices causing an increase in transportation and food prices.

President Susilo Bambang Yudhoyono's government on Oct. 1 almost tripled kerosene prices and more than doubled diesel tariffs on Oct. 1.

Gasoline prices rose by 88 percent.

The association had to cut the forecast because "purchasing power declined after the fuel price increase," Purnomosidi told reporters on Wednesday

"For example, those who were able to pay Rp 500,000 (US$50) a month housing loan installments may not be able to do it anymore now because other expenses surged."

Consumer prices surged 17.9 percent in October, the fastest pace in six years. Prices are expected to rise 17.4 percent in November, according to the median forecast of 11 economists in a Bloomberg survey.

Still, home sales this year may be 10 percent higher than the 73,000 sold in 2004 because of faster economic growth in the first half of the year, Purnomosidi said.

Indonesia's gross domestic product expanded 5.3 percent in the third quarter after growing 5.8 percent in the previous three months and 6.2 percent in the first quarter, the fastest pace since 1996. -- Bloomberg