Senin, 31/08/2009

Waiting for the Next Wave

-jktproperty.com
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Waiting for the Next Wave

THE CURRENT GLOBAL economic crisis started in 2008. So far a number of countries have shown signs of recovery. They have managed to survive recession. However, property analysts still cannot determine what cities in the world will be the first to get out of the global crisis.

“Waiting for the next wave” is the term coined by Jones LaSalle to describe countries that are readying themselves to greet the awakening of the global property industry. And, how about the position of Indonesia?

The impacts of the global crisis differ from one country or one region to the other. Overall, the world property market condition, notably commercial property, is till not stable enough. Indeed, some countries or regions may have made visible achievements in terms of property market growth.

Still, other indicators need to be found before determining which countries or regions have been the first to recover from the global crisis. The UK, which is viewed as the hardest hit, is predicted to be the first to recover from the crisis, according to several analysts and business players. Roger Orf, Citi Property Investors President, views that commercial property in BRIC countries – Brazil, Russia, India and China – will be the first to get back to recovery. Orf added that property sector growth in these countries even can reach 9-12 percent. While other countries still focus on efforts to keep up market optimisms, the BRIC countries are viewed as now ready to get out of the crisis soon. Meanwhile, others view that the Asian and European regions are witnessing an acceleration of economic growth and will take the lead in the recovery process.

They can even take pride in their achievements to get out of the crisis that hit them a decade ago, and at the moment they have become even stronger to make achievements. When other regions like America and Europe are still slow, Asia now appear more enthusiastic with a number of new projects that also aim to anticipate high growth in the future. India and China, which were also hit by the crisis a decade ago, have now regained self-confidence in reviving their property market. Indiabulls, India’s largest developer, has planned to launch 6-7 residential projects in March 2010 and expects much higher demand at that time.

Similarly, SOHO, China’s commercial property developer, has allocated US$1.9 billion to develop its land bank in Shanghai and Beijing with several new projects in September of this year. The Asian region is said to be quite self-confident after managing to survive the current global crisis. Several countries, notably China, are taking new steps to seek foreign destinations for their investments. Australia is now the most popular destination.

The small continent, which is Asia’s neighbor, is viewed as an investment destination which is quite secure and which has not been severely affected by the current global crisis. Australia is like a promising land for making investment. Data at CB Richard Ellis shows that 12 percent of total transactions in Australia in 2009 were from foreign investors. That figure is higher than last year’s 9 percent. Richard Butler, Senior Managing Director of CB Richard Ellis, International Investments, said, “Australia probably is a safer bet, where return will be more secure and safe because of the transparency.

Whereas no one wants to go into markets that are decimated like Singapore at the moment which is suffering from massive oversupply.” The same sentiment was also aired by Jones Lang LaSalle. It said that in Q1-2009, when compared with Shanghai, Hong Kong, Tokyo and Mumbai whose commercial property prices have declined 30 percent, in Australia prices fell only around 15 percent. The same happened with lease prices. In Sidney, they fell 25 percent while in the other four cities they dropped by up to 30 percent.

The residential property market in Australia also has got better with the rise in their averaged prices by 3.3 percent in the past quarter. Data at Australian Property Monitor shows that in Q2-2009 home and apartment prices reached their highest levels since December 2007. Meanwhile, only Brisbane and Perth have experienced prices falling to below the June 2008 levels . So far foreign investors in the commercial sector are Woori Investment from South Korea, Sekisui from Japan, China Investment Corporation and those from other Asian countries like Malaysia, Indonesia and Hong Kong.

China Investment Corporation has injected US$200 million into Goodman Group. Developers from China also are looking into the possibility of teaming up with others to develop residential projects in Australia. According to CBRE, developers from China now begin to feel comfortable to make investment far away from home because the Chinese government has eased its regulations on foreign investments. Also, banks in China now have big amounts of liquidity reserves that can be used as investment funds.

Although Australia looks so attractive the IMF has warned that at the moment property prices in that country are too high, which is 5-15 percent above standard levels, while lease prices are also too high, or 20 percent above standard levels. If this situation remains there is possibility Australia will experience a recession and banks will suffer big losses.

Accordingly, investors need to be careful in the Australian market. Indonesia’s opportunity Predictions about significant correction of property prices this year in Hong Kong, Singapore, Japan and Sydney have prompted investors to seek alternative markets for their business expansion. Indonesia, notably Jakarta, is said to have extraordinary potentials. Investors are eyeing the city because it has quite interesting success stories.

What success stories? According to Nick Van Helden, Country Head Jones Lang LaSalle Indonesia, it is not a remote possibility that in the coming few years Indonesia will become an attractive destination for property investments, even equalizing Hong Kong, India or Singapore. With predictions that property price growth in developed countries like Hong Kong, Singapore, Japan and Australia (Sidney) will experience a significant correction this year, investors will begin seeking alternative markets for their business expansion. “And Indonesia at this time has a quite interesting success story. As such, foreign investors will possibly direct their attention to Indonesia,” Van Helden said.

Van Helden said further that the global economic crisis that has hit the word since last year now has shown signs of receding. Even some people said the worst times of the crisis are over already. The rapid fall in economic growth in many countries is receding. In some countries, it even has turned around towards positive growth. Indonesia, one of a few countries having not plunged into serious recession in the current global crisis, is predicted to be able to attract international investors to invest their capital in the country.

“Several international financial consultants even have mentioned Indonesia as one of Asia’s most potential investments destinations after China and India. Indonesia is predicted to experience the most rapid growth in Asia Pacific, blow India. Surely this will be an attractive factor for international investors to invest their capital in Indonesia, including its property sector,” Van Helden said. Such optimisms will surely enhance market sentiments and help accelerate economic development in Indonesia.

Growth in various business sectors will continue rising, including the domestic property sector. Then, what is the real condition of the Indonesia property market at the moment, notably in Jakarta? According to Anton Sitorus, Head of Research at Jones Lang LaSalle Indonesia, until the end of Q2-2009 property market in Jakarta saw a decline in demand in almost all sub-sectors. Except the office sub-sector in non-CBD areas, absorption level in Q2 fell at different rates. The office sub-sector fell 70 percent from the previous quarter. This development had been anticipated.

The global economic crisis and the weakening domestic economy had led to predictions that property market in Jakarta probably would grow at minimum rates until end-2009. Anton added however that with many people expecting next year’s economic recovery, the Indonesian property market will also edge up. As a matter of fact, the Indonesian economy started recovering early this year. Price indices also indicated such development. In the first six months the combined price indices of the Indonesian Bourse (HSG BEI) rose sharply and its growth was the second highest, after China. Meanwhile, Rupiah appreciated at the highest level in Asia.

Concerning security issues that no doubt can affect business and economic activities in Indonesia, Lucy Rumantir, Chairman Jones Lang LaSalle Indonesia, said business players now look more rational when facing such issues. This was evidenced by the reaction of the stock market and the money market to the recent bloody bomb terror in Jakarta’s Mega Kuningan.

What Lucy is saying is that the wave of the Indonesian economic growth has started rolling and it will continue in the coming years, even at ever bigger scales. And activities in various business sectors will continue to increase significantly. The property market, which this year experienced a decline in demand and a stagnation in prices, has potentials to rebound in 2010. The sub-sectors firstly experiencing recovery will be commercial office, which will be followed by the sub-sector of lease shopping malls and lease apartments.

They are predicted to start growing significantly in 2011. Meanwhile, the strata condominium market is viewed as the most elastic sub-sector vis-à-vis economic growth especially the trends of interest rate growth. In line with the cut in loan and deposit interest rates, sale rates and people’s interest in making investment in strata condominiums is predicted to rise significantly next year.

Lucy added that the variations and differences in time span and market growth rate in each property sub-sector will require investors to carefully observe and read market trends and analyze existing competences. Potentials and challenges are so visible. What still has to be done is prepare strategies and adequate anticipatory measures to ride the wave at full capacity. (Deddy H. Pakpahan)