The global economic crisis has apparently affected the apartment market here, with sales declining in the last quarter of 2008.
Due to high interest rates, many prospective buyers have opted to invest their money in banking products rather than in property.
Project output of upmarket apartments has dropped 34.4 percent from the previous year, while pre-sales have likewise fallen 35.4 percent. However, the demand for low-cost apartments is still good as it hovers at about 70 percent for pre-sales of future projects. Meanwhile, the completion of some projects, originally planned for 2008, have been delayed until 2009.
The occupancy rate is still low, at 62.1 percent, down by 0.5 percent from the previous quarter. The decreased is tied to the low number of home loan approvals by banks as well as the wait-and-see attitude of potential customers.
Out of the 3,700 apartments targeted for completion at the end of 2008, only 770 were completed on time. The apartments completed belong to three projects, namely Nirvana Kemang, The Regatta on Mutiara Beach and Thamrin Residences in Jakarta's Central Business District. These projects have added to the cumulative number of condominiums available totaling 68,514.
Although there is a slump in the condominium market, a number of new projects were launched in the fourth quarter of 2008, namely Setiabudi Royal Residence in the Setiabudi area, Cosmo Terrace in the Thamrin area, Tower 3 of Residence 8 in the Senopati area, El Medina Residence in the Warung Buncit area and The Royale Springhill Residences in Kemayoran. Up to the fourth quarter of last year, the projects added 30,256 units, an increase of 1.1 percent from the previous quarter. Meanwhile, two low-cost apartment projects were launched in the same quarter, namely Orchard Palace Residence in Tangerang and Menara Latumeten in Grogol, West Jakarta, which will make available a total of 39,595 low-cost apartments.
The middle-class segment still dominates the market with its 51.3 percent share in the fourth quarter of 2008, while the upper-middle-class and high-class segments have a 33.3 percent and 15.4 percent market share respectively.
In spite of the overall economic situation, property is deemed a safe investment as can be seen from the stable demand for upper-middle class property in strategic locations. Many expect this trend to continue, albeit with a slight slowdown in sales.
Developers, therefore, are frantically trying to come up with seductive marketing strategies to lure customers. One strategy is the offer of flexible payment terms.
A number of projects under construction, especially those depending on bank financing, will have to reschedule their completion target due to pending approval on their loans. Some projects, however, will be delayed for a long time. In a way, such delays will balance the supply and demand of condominiums on the market.
Likewise, the global economic crisis has also had a negative impact on apartment rentals, as indicated in the declining demand in the fourth quarter of 2008. This is an unusual situation, because normally at the end of every year most multinational companies look for the most suitable residences for their expatriate employees for the coming year.
On the other hand, serviced apartments, especially the latest ones, are doing better business as shown by their high occupancy rates in spite of their comparatively more expensive rates.
The total decline in the fourth quarter of 2008 is significant, that is 129 units, while the previous quarter saw an increase of 672 units. While the market net absorption declined by 28 percent to 2,268 units, output also fell by 36 percent. The year 2008 also saw a drastic decrease in apartment rentals of 41 percent totaling 2,812 units as a consequence of falling market demand.
By the end of 2008, low-range apartment rentals declined by 0.6 percent, bringing the occupancy rate down to 70 percent, while the rates for upmarket apartment rentals and serviced apartments were 69.2 percent and 76.7 percent respectively. Rental apartments faced stiff competition from the newly built upmarket apartments that flooded the market in 2008.
The high demand by expatriates to a certain extent has led to a high occupancy rate in serviced apartments. This is also the case of those recently completed in 2008. Serviced apartments by leading operators, such as Marriott, Ritz-Carlton, Ascott, Oakwood and Aston, are enjoying a healthy market share from both expatriates for long stays and from locals who stay for days or weeks.
Total apartments and serviced apartments increased by 2.3 percent in the fourth quarter of 2008 and by 14 percent in 2008, bringing the cumulative total to 31,147 units.
Although the majority of the apartments available (81.3 percent) are rented out directly by the owners, the increase in the sub-sector of condominiums is only 14.5 percent for the year 2008. In comparison, the sub-sector of serviced apartments has grown significantly by 25 percent in 2008, with a total of 2,400 new units from three serviced apartment providers, namely Oakwood Premier Cozmo, Residence at the Peak and Aston Mediterania Marina Ancol. In 2008, rental supply decreased because several developers changed the status of their units to strata-title.
In the same quarter, new apartments became available in the form of Alamanda and Bougenville Towers at Thamrin Residence, Avana Tower at Nirvana Kemang and Dubai Tower at Regatta.
In 2009, about 1,050 new rental and serviced apartments will become available, with the majority being upmarket apartments (7,000), which will make the competition tight.
In 2009, less demand is estimated for rental apartments due to a reduction in short-term leasing by expatriates whose companies cancel projects funded by multinational companies in Indonesia. Likewise, demand from domestic customers will also decline, resulting in low occupancy rates in luxury apartments.
While demand from oil, mining and telecommunications companies will remain stable, those dealing in finance and banking will reduce their housing budgets for employees and seek less costly residences instead.
Lowering demand and stiff competition will eventually have an impact on rental rates and in turn will prompt the introduction of more flexible payment terms.
However, in the near future, a large number of luxury apartments are predicted to enter the market, while in the lower range the largest supply will come from serviced apartments or condotel units.
Source: Arief Rahardjo , Contributor , Jakarta | Tue, 02/03/2009 3:41 PM | Supplement
Due to high interest rates, many prospective buyers have opted to invest their money in banking products rather than in property.
Project output of upmarket apartments has dropped 34.4 percent from the previous year, while pre-sales have likewise fallen 35.4 percent. However, the demand for low-cost apartments is still good as it hovers at about 70 percent for pre-sales of future projects. Meanwhile, the completion of some projects, originally planned for 2008, have been delayed until 2009.
The occupancy rate is still low, at 62.1 percent, down by 0.5 percent from the previous quarter. The decreased is tied to the low number of home loan approvals by banks as well as the wait-and-see attitude of potential customers.
Out of the 3,700 apartments targeted for completion at the end of 2008, only 770 were completed on time. The apartments completed belong to three projects, namely Nirvana Kemang, The Regatta on Mutiara Beach and Thamrin Residences in Jakarta's Central Business District. These projects have added to the cumulative number of condominiums available totaling 68,514.
Although there is a slump in the condominium market, a number of new projects were launched in the fourth quarter of 2008, namely Setiabudi Royal Residence in the Setiabudi area, Cosmo Terrace in the Thamrin area, Tower 3 of Residence 8 in the Senopati area, El Medina Residence in the Warung Buncit area and The Royale Springhill Residences in Kemayoran. Up to the fourth quarter of last year, the projects added 30,256 units, an increase of 1.1 percent from the previous quarter. Meanwhile, two low-cost apartment projects were launched in the same quarter, namely Orchard Palace Residence in Tangerang and Menara Latumeten in Grogol, West Jakarta, which will make available a total of 39,595 low-cost apartments.
The middle-class segment still dominates the market with its 51.3 percent share in the fourth quarter of 2008, while the upper-middle-class and high-class segments have a 33.3 percent and 15.4 percent market share respectively.
In spite of the overall economic situation, property is deemed a safe investment as can be seen from the stable demand for upper-middle class property in strategic locations. Many expect this trend to continue, albeit with a slight slowdown in sales.
Developers, therefore, are frantically trying to come up with seductive marketing strategies to lure customers. One strategy is the offer of flexible payment terms.
A number of projects under construction, especially those depending on bank financing, will have to reschedule their completion target due to pending approval on their loans. Some projects, however, will be delayed for a long time. In a way, such delays will balance the supply and demand of condominiums on the market.
Likewise, the global economic crisis has also had a negative impact on apartment rentals, as indicated in the declining demand in the fourth quarter of 2008. This is an unusual situation, because normally at the end of every year most multinational companies look for the most suitable residences for their expatriate employees for the coming year.
On the other hand, serviced apartments, especially the latest ones, are doing better business as shown by their high occupancy rates in spite of their comparatively more expensive rates.
The total decline in the fourth quarter of 2008 is significant, that is 129 units, while the previous quarter saw an increase of 672 units. While the market net absorption declined by 28 percent to 2,268 units, output also fell by 36 percent. The year 2008 also saw a drastic decrease in apartment rentals of 41 percent totaling 2,812 units as a consequence of falling market demand.
By the end of 2008, low-range apartment rentals declined by 0.6 percent, bringing the occupancy rate down to 70 percent, while the rates for upmarket apartment rentals and serviced apartments were 69.2 percent and 76.7 percent respectively. Rental apartments faced stiff competition from the newly built upmarket apartments that flooded the market in 2008.
The high demand by expatriates to a certain extent has led to a high occupancy rate in serviced apartments. This is also the case of those recently completed in 2008. Serviced apartments by leading operators, such as Marriott, Ritz-Carlton, Ascott, Oakwood and Aston, are enjoying a healthy market share from both expatriates for long stays and from locals who stay for days or weeks.
Total apartments and serviced apartments increased by 2.3 percent in the fourth quarter of 2008 and by 14 percent in 2008, bringing the cumulative total to 31,147 units.
Although the majority of the apartments available (81.3 percent) are rented out directly by the owners, the increase in the sub-sector of condominiums is only 14.5 percent for the year 2008. In comparison, the sub-sector of serviced apartments has grown significantly by 25 percent in 2008, with a total of 2,400 new units from three serviced apartment providers, namely Oakwood Premier Cozmo, Residence at the Peak and Aston Mediterania Marina Ancol. In 2008, rental supply decreased because several developers changed the status of their units to strata-title.
In the same quarter, new apartments became available in the form of Alamanda and Bougenville Towers at Thamrin Residence, Avana Tower at Nirvana Kemang and Dubai Tower at Regatta.
In 2009, about 1,050 new rental and serviced apartments will become available, with the majority being upmarket apartments (7,000), which will make the competition tight.
In 2009, less demand is estimated for rental apartments due to a reduction in short-term leasing by expatriates whose companies cancel projects funded by multinational companies in Indonesia. Likewise, demand from domestic customers will also decline, resulting in low occupancy rates in luxury apartments.
While demand from oil, mining and telecommunications companies will remain stable, those dealing in finance and banking will reduce their housing budgets for employees and seek less costly residences instead.
Lowering demand and stiff competition will eventually have an impact on rental rates and in turn will prompt the introduction of more flexible payment terms.
However, in the near future, a large number of luxury apartments are predicted to enter the market, while in the lower range the largest supply will come from serviced apartments or condotel units.
Source: Arief Rahardjo , Contributor , Jakarta | Tue, 02/03/2009 3:41 PM | Supplement
