Strong demand boosts housing construction to near pre-crisis level

Adianto P. Simamora, The Jakarta Post, Jakarta

After being in the doldrums throughout the late 1990s economic crisis, the house-building sector has been rapidly recovering this year with supply expected to reach near pre-crisis levels amid strong demand, according to experts.

Sindiani Surya Adinata, an analyst at property consultant PT Procon Indah said the relatively stable political and macroeconomic conditions had triggered developers to begin constructing houses again.

Booming demand has resulted from the strengthening rupiah and the lower interest rate environment, which is reviving consumer confidence and has in turn been encouraging people to buy new houses.

"Yes, there has been an increase in demand in the construction sector," Sindiani said, but added quickly it would take more time for the house-building sector to fully recover to pre-crisis levels.

Industry players, however, are much more optimistic.

Eppi Pribudhi Soeriawidjaja, president of property developer PT Catur Mitra Persada, said the construction of middle-and-upper-class houses would soon reach 1997 levels of around 6,796 and 1,401 units, respectively, this year on the back of strong demand.

"Many people in Jakarta, particularly those who were affected by flooding, will start seeking new 'safer' houses this year," he said.

He said the strong demand for new houses could be seen by the various housing exhibitions that have been held in Jakarta.

"In just four months, we have been able to market some 40 upper-class houses just in the Pamulang area (Tangerang)," he told The Post.

Darmasetiawan Bachir, secretary-general of the Indonesian Assocation of Real Estate Developers (REI), said demand for low- cost housing was also on the rise.

He added the supply of low-cost houses this year would reach 130,000 units, surpassing the 1997 level of about 120,950 units.

The government is allocating Rp 255.3 billion in subsidies to help low-income people purchase this category of house.

Sindiani said that in addition to the favorable macroeconomic and political situation, the surge in housing demand this year was also because of stalled demand in previous years.

She hoped the government could maintain the current positive situation so recovery in the property sector would be faster than anticipated.

Darmasetiawan said that a recovery in the property sector would have a positive wider effect.

"At least 104 industries related to the construction sector will benefit from the recovery in house building," he said.

The Indonesian Cement Association said earlier that domestic cement consumption was expected to jump to an all-time high of 29 million tons this year, mainly driven by high demand from the housing sector.