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ngoing apartment construction projects estimated to be completed this year will create an oversupply, which will see the property markets in major cities, such as Jakarta and Surabaya, experience only a modest hike in rental and selling prices this year.

Property consultant Colliers International foresees little increase in demand with massive upcoming apartment projects still in the pipeline.

“In 2018, the apartment supply will jump significantly because there will be additional units from last year’s projects,” Ferry Salanto, Colliers International senior associate director, said on Tuesday.

Last year, only 38.4 percent of the targeted apartment construction figure of 21,167 units was completed, mainly because of soft absorption that led to delays in delivery time. The incomplete projects will add to the new units expected to be finished this year.

In total, 62,116 new apartments will be completed from 2018 to 2020. The apartments under construction are spread across various locations including in central business districts, East Jakarta, West Jakarta and North Jakarta.

Given this situation, the property consultant predicts that the average apartment price in Jakarta will only experience a modest increase of 5 to 6 percent to Rp 34.5-35.5 million per square meter in 2018.

In line with the low increase in apartment prices, the average rental price of apartments is also estimated to increase only slightly, in the range of 2 to 3 percent.

Demand this year would be dominated by real home buyers rather than investors, Ferry said, considering that the average take-up rate would rise moderately.

Meanwhile, the government’s ongoing massive infrastructure development has encouraged major foreign and local property developers to build more high-rise buildings.

Local property developers such as Sinar Mas Land, Intiland Development and Alam Sutera have collaborated with foreign developers in the belief the condition of the real-estate industry will improve in the near future.

This indicates that Indonesia’s economic growth will improve in 2018 compared to last year. The fact that Jakarta is home to roughly 10 million people, the majority of whom are of productive age, also provides an opportunity for the apartment market to grow.

Colliers has observed that the majority of Indonesians prefer to buy apartments using cash installment methods to property developers, although such methods were considered risky.

People prefer this method because it is easier to pay installments without having to pay a high down payment, compared to if they lend the money through banks.

“If they buy with bank loans, there is a loan-to-value (LTV) policy, which means if they buy more units, they have to pay higher down payments,” Ferry said.

Meanwhile, for Surabaya, Colliers predicts that the overall apartment demand will remain flat. The price strata for apartments is expected to increase by 5 to 6 percent in 2018.

Buyers in Surabaya tend to be more responsive to new apartment projects developed by reputable developers in strategic locations. The high profile investors opt for hard cash or cash installment payments for buying the properties.

“Most buyers in Surabaya buy apartments as investments. They prefer to buy middle to upper class apartments in excellent locations,” Colliers advisory services director Monica Koesnovagril said.

Despite the patchy outlook, Colliers remains hopeful of the long-term prospect of apartments in the city, as Surabaya is the economic hub for eastern Indonesia. There are more than 80 universities and many large scale companies in the city, which drive the market for apartments.