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)