Sales of houses surge despite monetary crisis

Sales of houses surge despite monetary crisis

JAKARTA (JP): Private home developers have experienced a surge
in business since the rupiah fell sharply in value against the
U.S. dollar at the end of last year, a property analyst said
yesterday.

First Pacific Davies Indonesia (FPDI), a property services
company, in its latest weekly report said that while the lessors
of commercial properties faced serious difficulties sustaining
their dollar pricing strategies, private home sales had benefited
from the economic crisis.

A weakening rupiah has forced existing commercial projects to
set fixed exchange rates or offer significant discounts, while
developments still under construction are threatened with delay
until stability returns.

Private homes -- traditionally sold in rupiah -- have
maintained relatively stable prices and have become a popular
choice for people looking for a better investment return than a
bank deposit can currently offer.

The rupiah fell in value from Rp 2,500 to the U.S dollar in
June to Rp 7,000 at the end of December. The trend continued into
January this year when the rupiah broke through Rp 15,000 to the
dollar.

The currency subsequently regrouped, rallying to an average of
between Rp 9,000 and Rp 10,000. Yesterday, the rupiah closed at
Rp 10,900 after touching Rp 12,500 in the morning.

Following government closure of 16 banks last November,
rumors of weakness among several strategic banks began to
circulate and some people looked for alternative ways to invest
their money.

Those who held U.S dollar savings accounts saw their deposits
increase fourfold in rupiah terms and some decided to cash in
their profits.

For both categories of investor, purchasing private homes has
looked an attractive investment opportunity.

Houses and plots of land in established estates have both
become popular. Housing estates located on the outskirts of
Jakarta are within a 30 minute drive of the city center.

According to FPDI research, the rush to buy houses began at
the end of December last year and lasted until the end of
February. The most sought after houses are those in middle and
upper class areas which incorporate unusual features, are well
located, sturdily built and managed by reputable developers.

Preferred house sizes range from 45 to 150 square meters.
Subdivided lot sizes average 350 per square meter. Prices for
developed units have averaged between Rp 900,000 and Rp 1 million
per square meter, while land prices have averaged between Rp
350,000 and Rp 700,000 per square metre.

Transactions have generally been carried out in cash. Buyers
have not taken out mortgages, which are difficult to obtain due
to tight bank lending policies and are considered risky in the
light of interest rate uncertainty.

Between June 1997 and Feb. 1998, sales in the four most
desirable housing estates on the outskirts of Jakarta amounted to
Rp 540 billion (US$54 million). Five thousand houses and
subdivided lots were sold. (gis)