Expatriate demand sends condo rentals up
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Strong demand from expatriates, in particular from Europe, India, Japan, Saudi Arabia, South Korea and the US, has propelled apartment rental rates up by 14.61 percent compared with the same period last year, a Bank Indonesia (BI) survey shows.
The BI survey shows a sharp increase in rental rates for upscale apartments in Jakarta as expatriates prefer to rent apartments near business districts in the capital, while the supply in such areas is limited.
As of the end of the second quarter, the number of leased apartments stood at 11,782 units. Strong demand from expatriates fueled rental rates to an average of Rp 173,620 (US$18.23) per square meter, up by 14.61 percent from the same period last year.
The survey noted that most of the expats rented apartments located in Jakarta’s Central Business District (CBD).
Indonesia Property Watch (IPW) executive director Ali Tranghanda told The Jakarta Post on Wednesday that the lack of leased apartments was due to ongoing projects of strata-title condominiums, particularly in South Jakarta.
“In addition, more expatriates prefer to rent apartments near business centers in the capital as our economy grows stronger. Hence, the increase in rental costs,” he said, adding that around 45,000 expatriates currently resided in upscale apartments in Jakarta.
Ali said this situation provided a potential business opportunity for investors who purchased middle to upper scale apartments from ongoing projects.
Separately, Colliers International’s associate research director, Ferry Salanto, said the growing demand from expats to rent upscale apartments was a sign for the government to allow foreigners to own condominiums in Indonesia.
“I think expatriates would contribute more to the state income through taxes if they were allowed to actually own the apartments. But, of course, there should be strong measures in place before doing that,” he told the Post over the phone.
In the past, efforts to open the property market to foreigners were hampered by the prohibition on land ownership, which remains intact as demanded by existing laws.
Currently, the government is mulling a regulation to overcome that problem by simply providing foreigners with the right to apply for the purchase of a Building Ownership Certificate (SKBG) that would be separate from land rights.
In another BI survey, the volume of residential property sales in the second quarter of this year decreased by 4.55 percent compared to the first quarter. Sales of medium-level houses, according to the survey, saw the biggest downturn by 18.24 percent compared to the first quarter.
Apart from the new school year and the Idul Fitri holiday, the drop in residential property sales has been attributed to a new policy, introduced in June this year, which increases the minimum down payment for 70-square-meter houses from 20 percent to 30 percent. This adds a burden to consumers, especially those in middle- to low-income brackets.
The survey, which was released last week, shows that in the second quarter of this year, a total of 1,261 condominiums were built in the CBD, while 879 were built in non-CBD areas in Jakarta.
These new builds increased the cumulative condominium supply in the second quarter to 82,683, up by 2.66 percent from the first quarter. (asa)