Indonesia property market to continue growth in 2012

There will continue to be strong growth in the property market in Indonesia, especially in Jakarta, property consulting firm Jones Lang LaSalle-Procon says.

The firm’s country head for Indonesia, Todd Lauchlan, attributed the growth to the nation’s strong economic growth, solid fundamentals, improving foreign investor sentiment and low interest rates.

“Many big foreign companies have expanded their businesses in Indonesia. In contrast, they reduced the size of their branches in the European zone and in the United States due to the global economic crisis,” he said on Wednesday in a statement.

Banks, insurance, securities, manufacturing, consumer goods, oil and gas and mining firms currently required more office space in Indonesia, he added.

Those corporate actions showed increasing investor confidence in Indonesia’s economy, which grew more than 6 percent in the past two years.

The investment-grade rating recently awarded to Indonesia by international rating agencies Fitch Ratings and Moody’s Investor Service also confirmed the rise in investor sentiment.

In December, Fitch raised Indonesia’s sovereign rating for long-term foreign and local currency debts to BBB- from BB+ with a stable outlook, 14 years after Indonesia lost its rating following the 1997/1998 financial crisis. The BBB- rating is considered investment grade, indicating a low risk for investment.

Moody’s followed suit earlier this month, raising Indonesia’s local and foreign currency debt rating from Ba1 to Ba2, its lowest investment grade rating, with a stable outlook.

Bank Indonesia has maintained its benchmark rate at a record low of 6 percent since November to spur growth in various sectors, including the property market.

Meanwhile, Anton Sitorus, the firm’s head of research, said Indonesia’s strong economy throughout 2011 had caused Jakarta’s property market to grow significantly, citing a 78 percent increase in office take-up in the Jakarta Central Business District (CBD) to 420,000 square meters.

“This is the highest office take-up ever in the history of Jakarta’s office market development,” he said.

Meanwhile, demand from areas outside the Jakarta CBD in 2011 increased by 154 percent to 143,000 square meters, he added.

“Those demands have consequently forced the office rental fees to jump,” Anton said, adding that fees grew 20 percent in the Jakarta CBD and 10 percent in other areas last year.

The firm’s residential project marketing group head, Luke Rowe, said separately that there was also high demand in the residential sector, particularly in the condominium market.

Condominium sales reached 8,500 units in 2011, double that of 2010 levels.

“In 2012, there will be a higher demand for residences in the city, considering people’s current preferences to live not far from their work places. Jakarta’s worsened congestion contributes to this choice,” Luke said. (fem)