Working hard to court Indonesians

Working hard to court Indonesians

JAKARTA (JP): Australian property developers consider
Indonesia a great foreign market. The Australian government is
also encouraging foreigners to purchase apartments in the
continent.

Many Indonesians are keen to purchase properties in Australia
for schooling, investment or retirement needs.

Dina Pattiasina, director of residential property consultant
Colliers Jardine, said Indonesians whose children were studying
in Australia were the main target of most Australian developers.

"The second prime target market includes those who want to buy
properties in Australia as an investment. Interestingly, though
the number is still insignificant, more and more Indonesians want
buy properties in Australia to use in their retirement," she
said.

"People who purchase the properties for schooling needs,
choose properties close to colleges and universities. For those
who want to buy properties as an investment, the central business
district is the best location. Meanwhile people who want to live
in Australia after their retirement, choose landed houses in
secondary locations where the prices are lower," she said.

According to Dina, most Indonesians can afford properties
ranging between A$200,000 and A$500,000, slightly higher than
what the average Australian can afford.

She said the three favorite Australian cities for Indonesians
were Sydney, Melbourne and Perth.

Property prices vary according to the cities, she added.

For a long time, Australia has been a popular country for
Indonesians wanting to study abroad. For four consecutive years
until 1997, Indonesian students were the second highest in number
among foreign students studying in Australia. From 1998 to 1999,
Indonesian students were on top of the list, followed by students
from Singapore and Hong Kong.

In 2000, the number of Indonesian students reached 17,626,
mostly pursuing graduate, postgraduate, undergraduate and
vocational courses or attending high school, according to data
from the Indonesian Embassy in Canberra.

It is understandable that most Indonesian students are self-
funded as many of their parents can even afford to buy properties
for their accommodation. Only about 3 percent of the total number
of Indonesian students are on an AusAid scholarship. AusAid is an
Australian agency that offers financial support.

The data also shows that Australia is the second most
attractive place to study for Indonesian students, after the
United States.

High-income group

Realizing the trend, several Australian developers regularly
hold property exhibitions in the capital to lure prospective
buyers among Indonesia's high-income group.

Among the leading developers are Central Equity Limited and
the Brady Group. Collier recently held an exhibition here
promoting its 45 Ord apartment in Perth.

Central Equity, a publicly listed developer, has operated a
local branch in Jakarta and Surabaya for quite sometime. The
company has several apartment projects in Melbourne.

General manager of Central Equity Victor Li, agreed that most
of the potential buyers from Indonesia were those who had
children studying in Australia.

"If their children were studying for three or four years,
owning an apartment would be much cheaper for the parents than
renting," he said.

Moreover, when they do not need the apartment anymore, it can
be sold at a profit, he added.

Many Indonesians are also interested in buying apartments in
Australia as the units can be leased with a leasing guarantee.

Li said buying an apartment unit in Melbourne, Victoria, for
example would be very advantageous compared to renting one.

For example a two-bedroom apartment in Southbank, Melbourne,
costs A$339,000. When purchasing a property in Australia, a
prospective buyer can borrow up to 70 percent (A$237,300) of the
cost of the property from any local bank, therefore he or she
will only spend A$101,700 as equity.

With interest fixed for five years at 7 percent, total
interest paid over the period will be A$83,055. So total expenses
for a five-year period is some A$22,104. Therefore the cost of
buying for a five-year period is A$105,158.

The figure is lower than renting for the same period of time
which works out to about A$112,391, assuming a rental fee of
A$391 per week and an increase of 5 percent per year.

When the owner wants to sell the property, he or she will earn
a profit as the value of the property increases at an approximate
rate of 5 percent per annum.

So, if the initial purchase price was A$339,000, the value of
the property after five years will be A$423,750, giving the
seller a A$84,750 gain. After deducting commission, legal and
advertising costs of about A$12,394 in total, the owner will
still gain A$72,356 or 71 percent as a percentage of the original
equity of A$101,700.

Most people are attracted by this forecast. It is also an
attempt to lure prospective buyers among the high-income group.

Besides the forecast, the quality of the buildings is better
than in Indonesia.

Promotion

Meanwhile, Matthew Georgeson, property consultant of Brady/PT
Brady Property Consultancy Indonesia, said his company's office
in Jakarta was its only overseas branch.

"We hold promotions and exhibitions regularly in various
cities across Indonesia including Medan, Bandung, Semarang,
Surabaya, Makassar and Manado," he said.

Brady's major target had shifted from investors (80 percent)
during the period before the monetary crisis to people who want
to buy apartments for their children studying in Australia (70
percent) after the prolonged economic crisis, he said. Brady
focuses on apartment projects in Melbourne.

Georgeson agreed easy payment schemes had been made available
to encourage prospective buyers.

"Prospective buyers should remember that they are only
required to make a deposit of 10 percent of the total purchase
price. And the payment will go to a trust account, not to the
developer. This is to protect the buyer," he said.

He said the balance could be paid, after the construction was
completed, on several schemes such as cash or installments, which
can be arranged with the bank.

Since Indonesia is regarded as one of the best markets for
Australian property developers, there must be many Indonesians
owning properties in the continent.

Both companies, however, refused to reveal how many Indonesian
had bought or were purchasing their apartments.

Li said there were also other factors encouraging people to
buy Australian properties.

"The market is very strong and the government supports first
home grants for Australian citizens and permanent residents. The
interest rates, meanwhile, remain low. Thirdly, the unemployment
rate is also low. Altogether, the conditions create a healthy
climate to buy properties," he said.

Australia has been also a favorite place to live in,
especially after the United Nations Development Program (UNDP)
ranked it the second best place in the world. UNDP issued
recently its report on the Human Development Index 2001 and put
Norway as the best place in the world. The third, fourth and
fifth ranked were Canada, Sweden and Belgium. Indonesia ranked
102th out of 162 nations monitored.

It is likely that more Indonesian will flock to Australia and
buy properties there.

Australian property market provides investment security and is
a very mature market with a promising annual appreciation rate.

In addition, many Indonesians also prefer Australia for its
proximity, cost and weather.

It is important to notice that based on the Federal Investment
Review Board's regulation, only half of the new apartments built
in the country may be bought by foreigners. In addition,
foreigners are only allowed to purchase new apartments or houses.

But, before you make a decision, the following tips might be
valuable:

1. Buy property directly from the developer.

2. Check the track record and portfolio of the developer.

3. Make sure the developer is a reputable company by checking
its existing projects.

4. Meet the developer in person.

5. Check and visit the construction site.

6. Hire a solicitor to study the contract.

7. Study the contract carefully to see if there are after
sales service, and construction or building structure warrants.

8. Study the payment scheme carefully to avoid excessive stamp
duty and select a bank that offers the best interest rates.