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The capital’s property market is expected to strengthen this year as the domestic economy begins to accelerate and interest rates remain relatively low, analysts say.

Utami Prastiana, head of research at property consultancy PT Procon Indah, said demand for office space was expected to pick up as companies begin expanding again but would remain weaker than prior to the outbreak of the global financial crisis in 2008.

Procon predicted demand for office space would rise 6.2 percent, from 160,000 square meters last year to 170,000 sqm this year.

In the central business district, office supply will increase by 13.5 percent, from 185,000 sqm in 2009 to 210,000 sqm in 2010, Procon forecast.

Bank Indonesia on Thursday held its benchmark interest rate at a record-low of 6.5 percent to protect economic growth, providing more time for banks to lower lending rates and boost demand for property.

The domestic economy is projected to grow by 5.5 percent this year, after expanding an estimated 4.3 percent last year.

Michael Broomell, managing director of property consultant PT Colliers International Indonesia, shared the view that the accelerating economy would stimulate the property sector.

“The global economy is picking up, so we will expect slight growth in the office sector,” he said. “The movement has been visible since early this year.”

However, Broomell said any expansion in supply would be mild because many new office buildings would not be completed until next year.

Colliers also predicted a modest expansion of demand in the retail sector as the economy improved, but saw a dramatic decline in supply as property developers had not anticipated a rebound in demand this year. Supply is projected to decline by just more than half, from 240,000 sqm to 118,000 sqm.

“The retail sector is not as healthy as the office sector, but the growth of the office sector will trigger [the retail sector],” Broomell said.

Utami said demand for condominiums would rise this year but would not keep pace with an increase in supply, causing developers to lower prices. Procon projected that the supply of condominiums would more than double this year, to 14,000 units from 6,300 last year. Meanwhile, demand is seen rising from 8,000 units to 10,000 units.

Broomell said the supply of condominiums was expected to surge by 40,000 units over the next two years, bringing the total market supply to about 120,000 units by the end of 2011.

But Anton Sitorus, head of research at property consultancy Jones Lang LaSalle, offered a more cautious outlook.

“I don’t fully agree that the condominium market will grow that much in 2010 in terms of supply. We predict that both the retail and residential sector will not show significant growth until 2011,” he said