Senin, 31/08/2009

Stronger Positive Sentiment in Indonesian Property Market

-jktproperty.com
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Stronger Positive Sentiment in Indonesian Property Market

INVESTORS ARE NOW MORE OPTIMISTIC about the Indonesian property market. In Q2-2009, macro-economic indicators showed signs of improvement amidst the global crisis. Improvement in the global economy has caused positive sentiments in the Indonesian economy although it was not yet a whole improvement. In Q2-2009, quite many indicators showed recovery in the Indonesian economy, and this helped improve the country’s property market.

The indicators included the 31.2 percent appreciation of rupiah against the US dollar. The conducive social and political condition following this year’s general elections also created positive sentiments against world share markets and kept the country’s financial market stable amidst optimisms about a sustainable global economic recovery.

Compared with Q1-2009, Indonesia’s inflation rate in Q2-2009 declined form 7.9 percent to 3.65 percent. It was caused by weakening external pressures that coincided with the strengthening of rupiah; low inflation in Indonesia’s trading partner countries; and weakening domestic demand. Bank Indonesia estimated that economic growth in Q2 reached 3.7-4 percent.

Meanwhile, Economist Intelligence Units in June 2009 estimated that the Indonesian economy would grow 2.4 percent this year and 3.1 percent in 2010. With such growth rates, in 2010 Indonesia will be among some Asian countries that succeed to leap out of the global crisis. Bank Indonesia estimated that this year’s national inflation will reach 5 percent, lower than last year’s.

Factors behind this include sufficient production and supply of goods, their smooth distribution and low pressures from essential goods prices. In June, Bank Indonesia reduced interest rates from 7.5 percent to 7 percent so as to stimulate national economic growth. That policy caused positive sentiments among developers who strongly expected that banks would have stronger confidence in providing loans for property projects like housing and commercial estates.

A decline in credit interests will benefit consumers, especially those from the housing and condominium sectors. Reduced interest rates raise consumer capacity and enable consumers to use bank credits to buy homes or condominium units.

Overview

On the whole, the Indonesian property market is showing signs of recovery. The subsectors recording significant development are office space and condominiums, while retails remain slow. Demands for office space at CBD were rising in Q2-2009 as companies, which had delayed their plan of leasing out office space, sought it this year. Office space occupation at CBD reached 86.6 percent in the first six months of 2009, which was relatively stable compared with the previous quarter.

In terms of business category, office space lessors at CBD were mostly insurance firms, consulting companies, and IT and technology firms. In terms of origin, national firms equaled the number of multinationals. Outside CBD, total absorption in Q1-2009 was 39,500 sq. meters, or 90.6 percent of total office space available in the area. Non-CBD absorption was dominated by South Jakarta and West Jakarta, with respective contribution of 45 percent and 29 percent. Absorption at new office buildings was dominant in Q2, with most buyers and lessees being small and medium scale firms. Retail is normally the sector most sensitive to the economic condition.

During a crisis, retail is the sector firstly affected due to people’s weakening buying power. On the contrary, when economic recovery starts, the retail sector is the first to recover. But, that did not happen in Q2. When the Indonesian economy got better the retail sector did not make significant performance. This was because space oversupply was not followed by rising demand. At major shopping centers, operating costs were estimated to rise due to more spending on security in anticipation of terrorist threats like the bomb attacks that recently rocked two prestigious hotels in South Jakarta, JW Marriot and Ritz Carlton.

At the moment, condominium transaction rates are stable, around 94.8 percent, with 3,500 units unsold. Meanwhile, transaction rates of finished projects average 91 percent. In such a tight property market, gross prices of lease apartments are stable, and lessors will continue offering attractive price packages like flexible payment periods, shorter lease periods that are 1-3 months only.

In the past, they were for a year, and competitive lease prices. In Q2, total areas planned for housing were relatively stable because no new large housing project was launched and no expansion project was carried out at existing housing estates. Of the total vacant areas, 42 percent was in Tangerang, 30 percent in Bekasi, 20 percent in Bogor and 7 percent in Jakarta. In terms of market segment, 65 percent of new units available in Q2 were meant for middle class buyers, 32 percent for upper class consumers while the remaining units for low earners. Housing absorption rates in Jabotabek (Jakarta-Bogor-Tangerang-Bekasi) in Q2 declined significantly, to 477 units per month.

Factors behind this included the upward trend of the national economic growth with the country’s economic indicators being more positive compared with the previous quarter, the domination of homes for medium and upper class buyers in Q2 so that their number was smaller, and consumers focusing on this year’s presidential election rather than on buying property. (JR)