40 condo projects under construction
The Jakarta Post
The massive volume of new supply will further flood the condominium market in Jakarta in the next few years, in alignment with the growing national economy and the healthy business environment.
According to the Jakarta Property Market Review 4Q/11, published by property consulting firm Jones Lang LaSalle, the market is scheduled to receive 14,900 new condominium units through 2012 from around 40 complete projects, which will be a record-high, should all projects be completed on time.
Further ahead, the strata market is slated to receive a total of 11,600 units by the end of 2014, making up the current total number of proposed condominiums in Jakarta from 2012-2014 to around 26,500 units, the report said.
Competition is thus likely to increase, as each project tries to generate more sales through attractive building concepts and facilities. Potential demand for strata-title condominiums is predicted to grow strongly, rising by 10-15 percent in annual sales this year on the back of the government’s efforts to provide a better environment for consumers by way of lower interest rates.
“The growth is expected to be sustained over the short-to-medium term. In contrast to the condominium market, the rental apartment market is geared more towards corporate leasing. Existing rental apartment projects in Jakarta, which consist mostly of older developments, are lacking the amenities offered by newer condominium developments,” the report said.
This will induce developers to focus on building more condominiums, rather than apartments. However, with hopes of a more conducive business environment attracting more expatriates, the rental apartment sector is expected to continue improving.
In terms of growth, seven apartment projects are scheduled for completion next year, including The Grand Hyatt Residence Keraton, and Plaza Senayan Tower C&D. These proposed projects should bring in a total new supply of 754 rental apartment units upon completion. Going forward, between 2013 and 2014, we also expect another 503 units to be delivered, with the highest contribution likely to come from the residential towers in the Ciputra World project, the report said.
Overall, the potential supply for the rental apartment market by end-2014 totals approximately 9,000 units. In the leasing market, enquiries for luxury rental apartments are expected to grow along with the increase in corporate activity, albeit at a slower pace than in 2011.
The slowdown in the global economy and the uncertainty of any recovery over the short – to medium-term are likely to put pressure on the rental apartment market, which is currently geared to expatriate demand.
According to the report, between October and December, last year, six new condominium projects were launched in Jakarta, bringing approximately 3,327 units to the market.
Some of these were extensions i.e. additional towers of current projects such as Pakubuwono Terrace (Tower South), Green Bay Pluit (Tower M), and Pakubuwono House, which is the next tower in the Pakubuwono Residences Complex. The other three are brand-new developments, such as Sudirman Suites, Setiabudi Sky Garden (Tower Sky and Tower Garden) and the Tifolia Apartments in the Pulomas area.
Two projects were completed in the fourth quarter of 2011 ( 4Q11 ) – Adaline Tower at Central Park Residences and a tower in The Park condominium. These projects added a total of 770 units to the market in 4Q11 with the total stock of strata condominiums, thus far standing at 76,309 units. By location, the CBD remained the highest contributor of new supply, accounting for 26.1 percent of the total stock.
In 4Q/11, the government cut the benchmark interest rate to a record low of 6 percent in order to accelerate lending to the real sector (i.e., manufacturing and production) as well as to boost consumption. These conditions helped buying demand in the condominium market, as evidenced by sales growth during the quarter. Sales in proposed projects totaled 2,580 units, an increase of 10.6 percent from the third quarter of 2011.
The majority of recent sales were in projects located in the non-CBD area and accounted for around 74 percent of the total sales booked over the last three months. By end-December, from the total of 26,500 condominium units being developed and offered for sale, about 60.8 percent had been pre-committed, leaving around 10,400 units still available for sale.
Similar trends also occurred in the rental apartment market, where leasing demand improved. Despite the lack of demand from the expatriate community, net absorption increased by around 29 percent quarter-to-quarter to around 196 units, coming mostly from short-term business and holiday travelers.
With no additional supply entering the market and growing demand in this quarter, vacancy rates in the rental residential market fell slightly to 19.6 percent from 22.1 percent in 3Q/11.
The positive buyer sentiment and the gradual increase in sales in the residential market were considered to be the driving factors behind rising condominium prices in Jakarta. The average price of condominiums rose to around Rp 15 million per square meters (sqm) as developers increased their selling prices following an improvement in sales.
Similarly, apartment rents also saw more promising conditions reflected in rising rents during 4Q/11. The average effective rent rose to US$14.49 per sqm per month, with the service charge rising to $3.39 per sqm per month. However, most landlords kept their current rates and were reluctant to increase them at year’s end in order to retain their tenants. Increased rents were mostly found in newer projects that enjoyed higher occupancy rates and had better quality buildings. Various concessions were still being offered however, including special rates for longer leases and flexible payment terms.
The overall positive performance of the country’s economy points towards a better outlook for the coming years. As the residential market aligns nicely with the domestic economy, we can also expect further growth in both the strata-title condominium and rental apartment markets. (nfo)
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