Selasa, 05/05/2009

Indonesia Strongest in Global Crisis
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Indonesia Strongest in Global Crisis

AMONG ASIAN CONTRIES, Indonesia is the strongest to survive the global economic crisis. When property prices in Malaysia, Singapore, Vietnam, India and Hong Kong are plunging, they remain stable in Indonesia. Even several developers are optimistic and gradually raise their property prices. In China, thousands of small-scale developers reportedly have collapsed while in Indonesia – at least according to data at Indonesia Real Estate Association (REI) – not a single property developer has gone bankrupt.

General Chairman of Real Estate Indonesia Teguh Satria said property prices in Asia had declined by an averaged 30 percent since the emergence of the global financial last year. Earlier, when Singapore, Hong Kong, Malaysia and Vietnam experienced property booming, the Indonesian property market enjoyed a relatively stable growth.

But, Teguh said, the property booming in almost all Asian countries was not grounded on real property prices, but because prices were raised to the highest levels possible. Property booming in Asian countries was also supported by tourist promotions, which brought in foreign investors to buy their property. “But, when prices peaked, nothing was done other than adjusting them. So, when the global financial crisis reached Asia, developers in the region were forced to reduce their property prices. Not surprisingly, property prices in Asia dropped by an averaged 30 percent, but that did not happen in Indonesia,” said Teguh.

Even, I observed that some prominent developers with proven achievements raised their sale prices gradually as demand was still quite high. Indeed, a number of developers delayed their projects due to financial problems. “There were developers that delayed their property projects but they did not collapse like in China or other Asian countries,” Teguh added.

Last year, thousands of small-scale developers in China reportedly closed down their businesses due to financial difficulties. Property prices in that country also declined drastically. Example, this year the housing prices are predicted to fall 15-20 percent. Even, property analysts in China forecast that as 200 million sqm of apartment space and housing will not sell this year.

This is really a fantastic figure. With such a big supply, there is possibility that within the next several years property prices in China will drop 40-50 percent. The policies of the Chinese government were also said to lead to a wrong direction in the sense that it continued to encourage liquidity-trapped developers to build residential property projects and sell them prices reachable to consumers while on the other hand available supply were difficult to sell.

Then thousands of expatriates working in China, notably South Koreans, returned to their home country in big numbers although apartment rent prices were cut by their operators. Malaysia’s property also experienced the same. The self-acclaimed ‘the truly Asia’ was also not strong enough to withstand the jitters of the global financial crisis although less severe than Singapore, China and Hong Kong. Data at Rahim & Co Chartered Surveyors said that property prices in Malaysia had declined 10-15 percent on average. Even, the quite many luxury condos built in Kula Lumpur City Centre (KLCC) experienced a decline in price, at 30 percent on average.

The number of newly built condos was small. In Vietnam, the condition is even worse. The quite many property projects built in Ho Chi Minh City have caused very tough market competition. Condo prices in the city, for example, are now 50 percent lower than their peak levels in 2007. Even, within the next several months, condo prices in Ho Chi Minh City are predicted to drop by more than 50 percent. Although less severe compared with other Asian countries, the global financial crisis also has affected the Indonesian property market.

The impacts of the crisis, which is now shaking the world economy, have begun to affect the growth of different business sectors in Indonesia, including the property sector. The weakening sentiment of investors and prospective buyers has caused sales at a number of residential projects decline significantly late last year. At the moment, that condition has begun to be felt in other property sub-sectors like commercial office blocks and rent apartments, in line with the decline in the demand from the corporate segment.

This condition is predicted to be continuing within the next months until the economy recovers in a significant way. For this, developers and investors need to take correct, strategic steps for surviving in the current times of crisis. A survey conducted by Jones Lang LaSalle shows that demand in almost all sectors in Jakarta dropped in the Q1-2009. Anton Sitorus, Head of Research Jones Lang LaSalle, said that the condominium and rent apartment subsectors experienced the sharpest decline, 50-60 percent, respectively, from the previous quarter.

Meanwhile, the absorption of commercial office space in the triangle area (CBD) dropped 26 percent from the previous quarter. Similarly, the rent shopping center subsector. “The only subsector that experienced a drastic demand was the property market outside the golden triangle [non-CBD], notably near the TB Simatupang ring road, which has jacked up total demand in that subsector by 62 percent as compared with the previous quarter,” Anton said.

Anton said further the fall in demand in Q1-2009 was also coupled with pressures on the growth of rent costs and prices. This was visible through the quite drastic increase in discount and incentive offers from developers and building operators.

Meanwhile, Vivin Harsanto, Head of Strategic Consulting of Jones Lang LaSalle, stressed the importance of repositioning, notably for aging buildings, so as to enable them to compete with new buildings that have been flooding the market in the past few years. The tendency of occupancy rate decline at a number of aging office buildings and rent apartments in Jakarta illustrates that the competitiveness of the projects is weakening. As such, improvement and repositioning are needed in accordance with the condition of the projects and existing markets.

For this, building owners need to undertake an in-depth assessment on property assets including market segment studies, local competition and future trend outlook. Slow market growth is predicted to continue in the coming months. Referring to the projections made by several parties and individuals who predict that Indonesia’s economic growth will recover in phases starting from 2009, Jones Lang LaSalle predicts that structural recovery in the property market will possibly start next year.

Meanwhile, developers, investors and building operators need to adopt correct steps and strategies to anticipate a market fall, preventing it from crushing in the ever-tougher competition. Beside serving as a survival plan, such a strategy is also meant as a preparation to gain optimum profits when the market leads to positive growth. In planning such a strategy, Lucy Rumantir, Chairwoman of Jones Lang LaSalle Indonesia, said that several important aspects need to be given attention to by developers and investors.

Of them, the main aspects are related to timing, market trends, selection of suitable partners so as to guarantee smooth financing and the continuity of projects. As regards timing, Lucy said that now is the right time for developers and investors to review and consolidate their projects while giving attention to the direction of development and the market absorption.

“If waiting until the market recovers, investors can miss the momentum of gaining high returns from rising property prices in the recovery period,” said Lucy. Lucy said further that other strategies can be adopted to survive in the current times of crisis namely form consortiums for developing projects. Consortiums can serve as an alternative vehicle for developers to continue existing in the current difficult times, aside from ensuring funding sources. She added that the current times of crisis are clearly difficult times for developers and investors. But, slowing market activities need to be used as an opportunity for making internal consolidation and preparing future development in anticipation of market recovery. As such, timing is a very decisive aspect. “After all, it’s all about choosing the right timing,” Lucy noted.

As regards the consortiums and partnerships between developers, Teguh said that almost all developers in Indonesia at the moment have adopted partnership models. This is based on people’s experiences with the 2008 crisis, in which almost all developers face liquidity problems. “So, at this time, with consortiums or partnerships, the capital structure of developers can become stronger, and also they can become stronger to face the current crisis, as compared with developers in other countries,” Teguh said. (Deddy H. Pakpahan)