Indonesia’s economic indicators have been unimpressive with the depreciation of the rupiah by more than 14 percent since the third quarter 2008.
The Jakarta Composite Index in October fell to 1,355 points whilst inflation soared to around 11 percent by end of December.
With the deepening global financial crisis it is anticipated most property sectors will be impacted despite the government’s actions to prevent this.
In Jakarta, absorption in the condominium market was relatively stable. In Q4 2008 around 1,900 units were transacted and a total of 9,600 units were transacted throughout 2008.
The strong take up was contributed mainly from newly launched projects with prices between Rp 200 – Rp 500 million per unit, within CBD locations, with good access to major public transportation, and investment motivated buyers.
The high mortgage rate and tighter competition created negative sales in some projects located in the West, CBD and South Jakarta.
A slight decline in the rental apartment occupancy rate to 69.7 percent was also recorded in the previous quarter.
The Jakarta office market showed strong performance to date with stable office occupancy rates recorded at 86.4 percent last quarter.
High annual demand during 2008 was contributed by the absorption of major tenants in newly completed buildings.
Retail development is expected to slow and careful planning considerations will be critical to success in this sector.
Industrial market investors have adopted a wait and see stance however, some foreign investors and local investor are still active in seeking small industrial land and standard factory buildings (SFBs).
The condominium market performance is predicted to slow in 2009.
Property developers and buyers will carefully consider their investment decisions due to high interest rates and tighter loan approvals.
Developers will start to offer flexible payment terms, such as longer installment/balloon payment terms, resizing their units, and offering special packages such as rental guarantees.
It is believed that a more flexible foreign property ownership regulation will be a good stimulator to push the condominium market.
Office future supply by end of 2010 will dominate the Kuningan and Thamrin areas and South Jakarta.
Occupancy levels in 2009 and 2010 are predicted to hover at 84.0 percent – 86.0 percent, due to the high new supply to be completed with lower current pre-commitment level achieved.
Office leasing activity is expected from relocations for rental efficiency, subleasing activities, space downsizing and surrendering of leased spaces. Further pressure in gross rental will be a challenge for landlords, although the effect of high inflation rates during 2008 has created higher operational costs.
The retail sector will face tighter competition with more pressure on rental and occupancy rates, and nine new projects opening in 2009.
Jabodetabek projected annual net supply for 2009 and 2010 will be 316,000 sm and 132.000 sm, respectively and about 117,000 sm is scheduled for opening in the next quarter.
Occupancy rate of Jakarta retail centers is predicted to remain stable at around 77 percent over the next two years.
Limited new supply in the Debotabek area until 2010 will slightly increase the overall occupancy rate to 75 percent.
Pressure on rental rates is expected to continue due to the lower economic growth projections, lower consumer spending and high competition. Further decreases in fuel prices will help reduce pressure on operational costs.
In the industrial sector, Bekasi is the favored area for industrial estates due to it’s accessibility to the harbor. As foreign investors prolong purchasing decisions until signs of recovery in the global economy, the industrial estate market is expected to slow.
Published in The Jakarta Post on January 30, 2009. By Utami Prastiana, an associate director at Procon Indah.
Photo courtesy of property-report.com