Rabu, 31/10/2007

Jakarta Condo Market Moving to Alarming Level

-jktproperty.com
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Jakarta Condo Market Moving to Alarming Level

THE CONDOMINIUM MARKET in Jakarta is said to have been moving to an alarming level. In the one hand, some property brokers face difficulty in selling new condominium projects. On the other hand, developers have not showed any signal to halt the development of new condominiums in Jakarta, at least for the next 1-2 years.

The supply of new condominiums during 2007-2009 is estimated to reach 34,773 units. Observing the figures of the first quarter and the second quarter of 2007, the condominium market in Jakarta was relatively stable. However, referring to the quantity of supply in the absence of strong sales growth, it is not impossible that the condominium market will see an anticlimax scenario in 2008 or 2009.

 

The quantity of condominium supply during 2007-2009 is stunning, compared to around 16,000 units in 1995-1997 and approximately 24,000 units in 2004-2006. Figures presented by PT Procon Indah’s Research Division are even far higher with the quantity of condominium supply in Jakarta in the first quarter of 2007 had reached 48,805 units. Some 20,800 units came from delayed condominium projects due for completion in 2006. The late supply of condominiums enters the market this year.

Procon assumes that customer purchasing power for condominiums in the primary market is still quite strong, particularly for pre-sales condominium projects. In the second quarter of 2007, for instance, sales of existing condominiums reached 3,688 units, with the cumulative sales rate of 94.2%, or 0.6% higher than the previous quarter. Meanwhile, by the second quarter of 2007 around 3,155 existing condominium units were unsold.

Despite the rise in cumulative sales, compared to the first quarter of 2007, Procon notes that sales of condominium projects during the period of time slightly dropped to 64% from 65.7% in the previous three months. It happened after developers had offered competitive prices, attractive discounts and flexibility of payment terms during the pre-sales period. Buyers’ reaction to the pre-sales condominium projects, especially middle and upper-middle class apartments, was very strong.

However, Agung Podomoro Group CEO Trihatma K. Haliman argues that the condominium market in Jakarta had not grown well, citing the restriction on foreign property ownership in Indonesia. Besides, the luxury tax on condominiums has incontestably prevented sales of some projects from growing significantly. “The government provides foreigners with the right to use land only, that’s all. In fact, their interest in the Indonesian property, mainly condominiums, is very strong, not to mention the prices that are fairly lower than other countries,” Haliman said.

By preventing foreign investors from owning property in Indonesia, he said, the country actually suffers potential losses of revenue from foreign exchange. The situation worsens as many Indonesians invest in property abroad. “Full property ownership by foreigners in Indonesia can compensate for capital outflows,” he said. Furthermore, Haliman urges the Directorate General of Tax to re-evaluate the imposition of luxury sales tax on condominiums. “[It] should not be completely dropped.

A slash is sensible. Luxury sales tax of 20% hit consumers and it will be difficult for developers to sell their projects.” Indoproperty Real Estate CEO Harry Jab acknowledged that selling condominiums in Jakarta in such a situation is a daunting task. He observed that only the low-middle segment is still robust. “Small sized condominiums with prices ranging from Rp300 million to Rp400 million per unit are most wanted. Demand for branded condominiums and lavish apartments are also fine. But, the market for old-style 80 m2 condominiums (the studio type) is definitely weak,” he said.

In addition, Harry, who is also a property marketing practitioner, pointed out that small-sized condominiums are preferred not for investment but for dwellings. “Most buyers are end users.”

Roaring Property Loans

Strong consumer purchasing power for condominiums has resulted in rise of the national property loans. During the first semester of 2007 bank loans for the property sector grew by 26.96%. Bank Indonesia reported that in June 2007 loans channeled to the sector reached Rp130.9 trillion, compared to Rp103.1 trillion in June 2006. The property loans as of June 2007 are broken down into construction loans of Rp31 trillion, real estate loans of Rp17.4 trillion, as well as house and apartment ownership loans of Rp82.5 trillion. As a result, the consumption loans during the first semester of 2007 climbed by 18.4% to Rp249.4 trillion, compared to the first semester of 2006 of Rp208 trillion.

On the supply issue, Procon saw two new condominium projects and a condominium enlargement project during the second quarter of 2007. These pre-sales projects are The Ambassade Residence on Jl. Denpasar (205 units, completion due in 2009), [email protected] Tower A (279 units, completion is due 2010), and Papyrus Tower (the project extension of CBD Pluit, completion due in 2008). The total of condominium supply in Jakarta in the second quarter of 2007 was 52,807 units with the new supply from Rasuna 18th (South Tower, 375 units) in the Kuningan area; Pearl Garden (195 units) on Jl. Jenderal Gatot Subroto; Senayan Residence Tower 3 (120 units) in Senayan; Jakarta Residence (Cosmo Mansion and Cosmo Residence, 627 units) on Jl. Kebon Kacang; Akasia Tower in CBD Pluit (256 units); French Walk Paris Garden Tower (200 units); and Gading Riverview City Home (688 units) in Kelapa Gading. Procon also found insignificant a price drop of 0.72% compared to the previous quarter. But, in general the condominium prices in the second quarter of 2007 grew by 1.99% compared to the same period in 2006.

The average condominium price at primary locations is Rp10.76 million/m2, while at CBD the figure is Rp13.45 million. Prospective buyers desiring to invest in the condominiums should pay a substantial attention to the downward trend in expatriates’ interest to live in condominiums. Even in several favorite locations, the number of expatriates living in condominiums has not showed signals of a significant rise yet. A slowdown in the condominium market net take-up in Jakarta is influenced by several factors, including the competition between condominiums and lavish houses in premium locations with more competitive prices and privacy. On the other side, drops in house ownership loan rates have encouraged customers to invest in landed houses, expecting huge fixed capital gains.

Alarming Level

As the market absorption is still weak, due to massive supply, it is not surprising if the condominium market in Jakarta is claimed to have been entering the alarming level. “Uncontrollable growth and the concentration of condominiums in a location have generated negative impacts for the local market. “Now the Jakarta condominium market is approaching the alarming level,” Jones Lang Lasalle Indonesia’s Head of Research Division Anton Sitorus said.

Responding to the imminent alarming level, developers should stop developing new property projects and subsequently remap market’s needs realistically. Market timing for all property projects should also be rescheduled. Otherwise, oversupply and market limitation are unavoidable, resulting in stagnation or even drops in the market. The indication of the bad scenario to materialize is obvious.

Today, many developers ease the terms & conditions of payment for potential buyers. The condominium prices start to decline, although still far from nosediving. Other apparent indication is a delay in the construction of 20,800 condominium units in 2006. If the market absorption capability is strong, the development of thousands of condominium units should have not been delayed as the projects are pre-sales in nature. The continuation of these projects depend highly on buyers. (DHP/JR/LEO)