T

he property sector in Indonesia is still growing impressively despite the global economic downturn.

New residential complexes, office buildings, condominiums and malls in Jakarta and its surroundings are being built and some of them have already been reserved or sold.

Indeed, we cannot compare today's property situation with the golden era before the global economic crisis as there is pressure on prices so that developers are taking a wait and see stance.

That was the unhappy situation of the property sector in the second quarter of 2009.

The Indonesian macro economy is experiencing slower growth as it is only 4 percent, down from the 4.3 percent in the previous quarter. The rupiah strengthened significantly against US dollar at the end of June, as the exchange rate was Rp 10,210 per US dollar, meaning it strengthened 13.1 percent from the March exchange rate.

Other economic indicators also improved during the second quarter. The stock market was positively active, while the combined stock rate went up from 1,462 in March 2009 to an average figure of 1,751 also in the second quarter. The interest rate went down and so did the inflation rate, which was at the lowest figure during the second quarter.

The year-on-year inflation rate in the second quarter of 2009 was only 3.65 percent, which was much lower than the 11.03 percent of the same period last year. In April 2009, there was a deviation as much as 0.31 percent, while in May it was 0.04 percent and in June 0.11 percent. With the low inflation rate in the first six months of 2009, the domestic year's inflation rate is predicted to be less than 6 percent.

Just like in the previous quarter, interest on one-month Bank Indonesia promissory notes (SBI) decreased, from 8.21 percent at the end of March 2009 to 6.95 percent at the end of June, while the three-month SBI rate also went down from 8.61 to 7.05 percent.

Along with the decreasing interest rate, investment loans also went down to 14.3 percent at the end of June.

The global economic crisis has also had negative impacts on rental apartments in Jakarta as there is less demand from expatriates.

The demand dropped 1.4 percent as there were no contract renewals due to cancelled short-term projects by foreign companies who employ expatriates.

However, serviced apartments managed by renowned developers that provide full business facilities and are located mostly in Jakarta's CBD are doing relatively good business. So, rental apartments and condominiums in this area have a relatively more stable market.

The presidential election on July 8 did not affect the demand as not many NGO workers came to Jakarta during the event.

The total demand for rental apartments in Jakarta during this period was 23,422 units, while the occupancy rate was 61.46 percent, meaning a decline of 0.95 percent during the same quarter.

The occupancy rate of serviced apartments in the second quarter was 67.18 percent, a decline of 2.65 percent from the previous quarter even though many domestic families stayed at apartments on the weekends and during the school holidays in June.

During this quarter, domestic customers were 17 percent of the total customers. Rental apartments are cheaper to stay at than serviced apartments so that they attract more domestic as well as foreign customers.

Besides Japanese and Korean customers, there was also an increase in other Asian customers, such as Chinese, Taiwanese and Indians. The occupancy rate of rental apartments went down slightly by 0.71 percent and remained at 73.58 percent, while rental condominiums' occupancy rate also declined by 0.80 percent, so the occupancy rate was 59.92 percent at the end of second quarter.

There were 510 new apartments available for lease in this period, while in the previous quarter the figure was higher at 921 units.

Only 470 new rental condominiums became available during this second quarter of 2009, hence the grand total was 38,108 units.

Percentage wise this means an increase of 1.65 percent to the first quarter, which was lower than the increase in the first quarter, 2.51 percent.

The 40 new serviced apartments at Kempinski Private Residences were officially launched in May. The location is a heritage landmark where Hotel Indonesia was located.

Most new apartments were concentrated in South and Central Jakarta, which are close to expatriates' offices. However, rental rates weakened or declined, while some remained the same. Due to the rupiah strengthening against the US dollar, the rental on apartments in rupiah decreased.

Only reputable developers can maintain the same rental rate during this period by providing excellent service. The rental rate for non-serviced apartments and for serviced apartments is relatively stable, between US$15.10 and $19.70 per square meter per month.

The condominium rental rate has decreased by 1.14 percent as it is now $13.86 per square meter per month during this quarter. Many older condominiums and apartments offer lower rates as well as flexible payment terms. Serviced apartments also offer daily rates.

The occupancy rate of rental apartments as well as serviced apartments will be continuously affected by the global economic crisis mostly due to less demand from expatriates. Therefore, payment terms will become more flexible.

About 450 new serviced apartments and rental apartments will be ready by the end of 2009, while 2,920 condominiums will also be ready.

Indeed, this reflects a weakening of the market in the short term, but for the long term it is still a promising prospect.