Connect with us

Indonesia

Property market builds momentum in Indonesia

As with other economies around the world affected by the global crisis, growth slowed in Indonesia in 2012. However, the property market is bucking the national trend

Oxford Business Group

Published

on

As with other economies around the world affected by the global crisis, growth slowed in Indonesia in 2012. However, the property market is bucking the national trend, with large real estate developers planning a wave of new construction and mid-sized companies launching office and apartment projects.

Statistics Indonesia said in January that growth in the final quarter of 2012 was 6.11%, compared with a revised 6.16% for the third quarter. Analysts have cited declining exports, a weakening rupiah and a growing current account deficit as reasons for the decline.

Indonesia Property

Indonesia is still mulling a regulation, first revealed in March 2012, that would allow foreigners to own property, though it would be restricted to condominiums

That trend, however, contrasts with confidence in the real estate market, underlined by a report released by Indo Premier Securities (IPS), a local securities firm, in December 2012.

Property will benefit from strong domestic spending and low inflation this year

the IPS said in its “Equity Strategy” report, noting the performance of two mid-sized companies, Metropolitan Land and Surya Semesta Internusa, and raising expectations over the former’s planned 4135-sq-metre office and apartment project, the M Gold Tower.

“The launching of M Gold Tower, located beside Grand Metropolitan mall in Bekasi, according to the management, was very successful, due to a high take-up rate,” the IPS said in its report.

In further evidence of bullish sentiment in the property market, on January 11, Lippo Karawaci (LPKR), the largest property development firm in the archipelago, announced that it had successfully issued $130m, eight-year senior notes to the international market.

This issue is a re-opening of LPKR’s existing 2020 senior notes, increasing the overall value to $403m. The issue was priced at $104.40, resulting in a yield of 5.2%, noted Singapore-based Kim Eng Securities (KES). “Moreover, the response from investors was overwhelming, with an order book of $845m, or 6.5x oversubscribed,” said KES.

LPKR has plans to build more shopping malls and hospitals in cities beyond Jakarta to capitalise on the increasing wealth of the expanding middle class, revealing at the end of 2012 that it will increase capital expenditure by up to 50% in 2013.

According to Ketut Budi Wijaya, the president-director of LPKR, as much as $200m of the 2013 capital exchange will be spent on its hospital business, as well as $150m for its mall operations, while the rest will be used to finance residential property projects.

Meanwhile, in their “Emerging Trends in Real Estate – Asia Pacific 2013” report also released in December, PricewaterhouseCoopers (PwC) and the US-based Urban Land Institute said that Jakarta would be Asia’s top real estate market in 2013, ahead of cities such as Hong Kong, Singapore and Sydney.

Condominium property for foreigners ?

Indonesia is still mulling a regulation, first revealed in March 2012, that would allow foreigners to own property, though it would be restricted to condominiums. The regulation would provide foreigners with the right to apply for the purchase of a Building Ownership Certificate, which is completely detached from land rights. At the moment, foreigners may lease property for 25 years, which can be extended for further periods of 25 and 20 years, bringing the total to 70 years.

“Foreign direct investment is increasing at a much higher rate – 39% in the first half of [2012] … Driven by increased demand from foreigners and locals alike, office rents shot up 29% year-on-year in the third quarter, according to [property services firm] DTZ,” wrote PwC in its report.

Expansion in 2011 saw a 78% increase in office take-up in the Jakarta Central Business District (CBD) to 420,000 sq metres, while demand from areas outside the CBD increased by 154% to 143,000 sq metres. It is estimated that about 45,000 foreign workers live in high-end accommodation near the capital’s business districts.

However, the survey also found risks in the market, citing credit difficulties, and tricky legal scenarios involving domestic land partnerships. The World Bank noted that “real estate and property pressures will need to be watched going forward” in an October 2012 quarterly.

To rein in the risk, in March 2012 Bank Indonesia, the central bank, introduced limits on the size of housing loans, capping mortgages at 70% of the value of the home, though properties measuring less than 70 sq metres are not subject to the regulation.

While such measures will temporarily cool the market for domestic housing purchases, as foreign investment takes aim at the burgeoning property scene, Jakarta will need to devise tighter regulation mechanisms for the money set to flow in.

Oxford Business Group

Oxford Business Group

Note: This article was written by  Oxford Business Group, the views and opinions expressed in this article are those of the authors and do not necessarily state or reflect the views of  Thailand Business News

With some of the industry’s most experienced analysts conducting on-the-ground research throughout the year, OBG provides its global readership with the business intelligence they need to stay ahead.

Comments

Ecommerce

Ecommerce News : Go-Jek Aims To Turn Indonesians Into E-Payment Users

Whenever you pay for a ride or service in cash, the Go-Jek driver will ask you if you want to store the change in the form of Go-Pay for future use. If you agree, the driver gets a bonus and you get discounts on your upcoming rides.

Avatar

Published

on

Wrapping up for the day? Read today’s key stories here.

1. Go-Jek is focusing on its e-payment platform, Go-Pay

It’s been available for a while, but a recent campaign successfully drove usage to a tipping point.

Whenever you pay for a ride or service in cash, the Go-Jek driver will ask you if you want to store the change in the form of Go-Pay for future use. If you agree, the driver gets a bonus and you get discounts on your upcoming rides.

Read the rest of the story here.

2. Cashless society push will speed smart city development in Malaysia

Malaysia’s Malaysian Global Innovation & Creativity Centre (MaGIC), smart city enabler Cyberview and Mastercard have signed an agreement to support the Malaysian government’s push towards a cashless society.

Read the rest of the story here

3. DHL taking part in drone tests

In addition to assessing the drones’ suitability for delivering parcels in urban areas, the project will examine if Deutsche Telekom’s mobile network can be used to connect unmanned aircraft systems (UAS) to the mobile internet.

Read the rest of the story here.

Continue Reading

Indonesia

Indonesia 2016: Foreign Investment Opportunities and Trends

Avatar

Published

on

When discussing the type of foreign clients we are looking for, we find ourselves proud to serve a wide variety of clients with diverse business operations. (more…)

Continue Reading

Business

Indonesia may replace Thailand as main automotive production hub in ASEAN by 2020

Strong evidence suggests that Indonesia will eventually replace Thailand to become the main automotive production hub in ASEAN, according to Markus Scherer, Global Automotive Sector Leader at Ipsos Business Consulting.

Avatar

Published

on

Strong evidence suggests that Indonesia will eventually replace Thailand to become the main automotive production hub in ASEAN, according to Markus Scherer, Global Automotive Sector Leader at Ipsos Business Consulting. (more…)

Continue Reading

Latest

Most Viewed

Subscribe via Email

Enter your email address to subscribe and receive notifications of new posts by email.

Join 13,634 other subscribers

Trending