Sales of new houses on an upward trend

I. Christianto Contributor Jakarta

After experiencing an economic downturn over the past three years, sales of new houses are showing an upward trend thanks to the expansion of housing loans.

The Center for the Study of Indonesian Property (PSPI) estimates annual sales of new houses will increase by 11 percent to 110,400 units this year from 99,500 units last year.

Sales of new houses, which suffered a 26 percent drop last year, have continued to increase in recent months and the promising trend is likely to continue with the increase in housing credits provided by banks.

The center estimates housing sales in the greater Jakarta area will contribute between 20 percent and 35 percent to the total number of sales across the nation. In 2001, total housing sales in the greater Jakarta area reached 35,800 units or 36 percent of the national figure.

"The increase this year is due to an increase in housing credits provided by both state owned and private banks, and also a decline in interest rates," the center said.

The total transaction value of house sales is forecasted to reach Rp 5.5 trillion this year, surging by 36 percent compared to Rp 3.49 trillion in 2001. The increase is because of the growth in middle-of-the-range housing projects.

Total housing credits are estimated to increase by 15.6 percent to Rp 38.48 trillion this year thanks to an improvement in the performance of local banks.

In the secondary house sector (houses that are not newly built), three leading brokers in Indonesia; Era Realty, Ray White and Century21 play a major role in the property industry, said PSPI.

"There is always a demand for secondary houses. When the demand for primary houses drop, the demand for secondary houses increases. In recent years, this is due to the increase in prices, while at the same time purchasing power has decreased."

According to PSPI, the total transaction value of the three brokers reached Rp 3.5 trillion in 2000 and Rp 4.5 trillion in 2001, slightly lower than the initial target of Rp 6.8 trillion. This year, PSPI predicted the three brokers would handle a total of Rp 5.2 trillion in transactions of secondary houses.

In addition to middle and upper houses, low-cost housing projects have also reemerged in the first quarter this year. The demand for low-cost housing remains high, but many developers are still reluctant to begin their projects, as the price is now much lower compared to the construction cost, according to PSPI.

PSPI reiterated the government should quit issuing new licenses to any developers planning new projects in the capital, West Java and Banten, following the recent floods, which hit the greater Jakarta area earlier this year.

"In the meantime, there has also been a policy to stop extending new licenses until 2010 for a new location for any developers as there is now an oversupply of housing plots and many have become idle."

House prices in the capital's real estate projects are normally higher than those in surrounding areas such as Bogor, Tagerang and Bekasi. This is due to the expensive cost of land in Jakarta. However, as the development cost is about the same, the differences among upper, middle or lower-cost housing relate to the characteristic of the projects and the taste of consumers.

The price of a house in the upper market in the Jakarta greater area ranges from between Rp 101 million to over Rp 500 million, the middle-of-the-range market from Rp 101 million to Rp 500 million, and the lower cost market from below Rp 50 million to Rp 100 million.

Anton said the floods that hit the capital earlier this year had affected real estate projects, but it had not slowed their operations.

"House prices in flood-prone areas will likely drop between five percent and 10 percent, but prices in Kelapa Gading in North Jakarta won't change as it is a favorite area. In the meantime, prices will increase from between 10 percent and 15 percent until 2004," he said.

Anton Sitorus of Research and Consultancy division of property consultant Colliers International (Indonesia) agreed with the center's estimate.

He said recovery in the housing sector started last year after a few major developers completed their debt restructuring plans with the Indonesian Bank Restructuring Agency (IBRA).

"Though the debt settlements have not been finalized, there have been indications of solutions, therefore the developers have restarted their projects. We have witnessed various promotions of real estate projects in the greater Jakarta area since the middle of last year," he said.

According to PSPI, out of the total property sector, houses and shop-houses will be the most wanted items this year.

The most desirable neighborhoods will be Pondok Indah, Kebayoran Baru, Permata Hijau (South Jakarta), Pulit, Pantai Mutiara, Pantai Indah Kapuk (North Jakarta), Puri Indah, Permata Buana, Green Garden (West Jakarta), Menteng in Central Jakarta and Kelapa Gading in North Jakarta.