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Jakarta Post

Investment in property sector remains lucrative option

Massive development in the property sector in Jakarta in recent years has led to the capital city being regarded as one of the world’s leading property investment destinations

The Jakarta Post
Mon, April 28, 2014

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Investment in property sector remains lucrative option

M

assive development in the property sector in Jakarta in recent years has led to the capital city being regarded as one of the world'€™s leading property investment destinations. Oversupply, however, poses a potential challenge.

Jakarta has recently been named as the hottest spot for prime real estate in the world for the second consecutive year, in a report by property consultant Knight Frank.

The report, known as the Global Cities Prime International Residential Index (PIRI), tracks luxurious property markets in 30 cities around the world.

It confirms that Asian markets, led by Jakarta, experienced the biggest price growth in 2013, followed by Auckland, Bali, Christchurch and Dublin.

It shows that prices for prime real estate in Jakarta increased more than in any other city, up by 38 percent by the end of 2013 compared to the previous year. The figure was almost exactly the same as the rate seen in 2012. Meanwhile, Bali ranked third with a 22 percent gain.

Very limited supply and very strong demand are factors driving Jakarta'€™s luxury property prices higher, even if the Indonesian economy is not as strong as it was maybe two years ago,'€ said Liam Bailey, Knight Frank'€™s global head of residential research.

The increase in Jakarta was more than double that in second-ranked city Dublin (17.5 percent) and third-ranked Beijing (17.1 percent). The forth and fifth were Dubai and Los Angeles, with 17 percent and 14 percent increases respectively.

The other countries in the top ten included Tel Aviv (12.7 percent), Bangkok, (12.3 percent), San Francisco (10.4 percent), New York (10.4 percent) and Sydney (9.3 percent).

Though the report was limited only to luxury real estate, it provided a picture of the current property market in Indonesia, informing those planning to purchase houses or apartments as investments.

Some people have indeed delayed their plans to buy property as new investments, due to the ongoing elections in Indonesia.

Head of investment at Sucorinvest Asset Management, Jemmy Paul, said that the recent legislative election and upcoming presidential election in Indonesia was pivotal to the property market in Indonesia, particularly in Jakarta, the country'€™s economic barometer.

'€œSome people are concerned that Indonesia will experience political instability. But there is no impact on the property sector. Relevantly, we can see that two leading presidential candidates, Joko '€œJokowi'€ Widodo and Prabowo Subianto, are development enthusiasts,'€ Paul said.

Similarly, property consultant firm Cushman and Wakefield said that property demand in Greater Jakarta remained high in the first three months of this year, despite political tensions ahead of the legislative election held earlier this month.

A first-quarterly report from the firm showed most sectors, including offices and residences, experienced strong demand during the first three months of 2014, with the exception of industrial estates.

The positive trend, according to the report, was attributed to strong investor confidence due to improving macroeconomic conditions during the January-March period.

Paul, meanwhile, emphasized that the property sector in Jakarta will weaken in the next couple of years.

'€œBoth the apartment and landed-house sectors rose significantly in the last two or three years. It'€™s estimated that the conditions will be slower until 2015 and will start to rebound in 2016,'€ he said, adding that the decrease was caused by an oversupply after many developers were involved in fierce rivalry in various developments, especially in the center of Jakarta.

'€œThere are still potential yields of about 6 percent to 7 percent as recurring incomes in office space and apartments,'€ he said.

With its notorious traffic, Jakarta offers opportunities for those interested in investments in real estate, mainly those situated in strategic locations such as the Tebet, Slipi and Kemayoran areas, in addition to the famous bustling golden triangle of Gatot Subroto, Kuningan and Sudirman.

While the actualization of mass rapid transit in the city is still some time away, demand for apartments in strategic areas remains high.

Funds are certainly among the first and more important things to consider when investing in apartments or any other property. People should review how much money they have and how much of their mortgage can be paid in installments over the preferred period. Then, potential investors should try to select apartment projects that suit their budget.

In addition to money issues, people intending to buy apartments as investments need to consider several things to avoid disappointment:

Check the developers and their track records

Research the location of and access to the apartment

Check the compound, including whether it is part of an office/business/commercial district or shopping mall

Select the ideal floor for the unit to be situated

View the facilities such as security, sport centers, swimming pools, adequate parking lots, cafes and restaurants. (I. Christianto)

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