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.