Domestic, Foreign Investors Bullish on Indonesian Property Market
Albertus Weldison Nonto
Jakarta’s fast-changing skyline is a testament to the re-emergence of the property sector. Across the board, it is poised to continue its strong showing in 2011.
Property analysts such as Anton Sitorus, senior manager at Jones Lang LaSalle, are bullish the sector will be among the 10 fastest-growing sectors of the economy in the coming year on the back of growing consumer demand and low interest rates.
Banks are reportedly falling over themselves to extend mortgages as consumers rely on cheap financing to acquire new homes and offices.
Residential properties, condominiums and office and retail space all offer promising returns for investors. Residential properties are the safest investment as land prices will remain stable, Anton said.
In terms of condominiums, Jakarta’s “golden triangle” represents a safe bet as reflected by the number of people swapping the suburbs for the city, he added, referring to the area between Jalan Sudirman, Jalan Kuningan and Jalan Prof. Satrio. In this sector, the Agung Podomoro Group will remain the major player, while Duta Pertiwi of Sinar Mas and the Bakrie and Lippo groups will also benefit from strong growth.
The Jakarta Globe is affiliated with Lippo Group.
The office sector also looks healthy, experiencing its highest growth in the last decade during 2010. In this field, established players such as Mulia still lead the sector while new players such as Bakrieland and the Lippo Group will also capitalize on demand.
Lippo leads the market in the retail sector, Anton said, despite the possibility of oversupply.
“I believe the consumer sector will slow down a bit in the first three months of 2011 due to the government’s decision to stop subsidizing fuel for cars, but it will recover and continue to grow,” he said.
For developers, there is ample opportunity in residential properties, too, given strong demand from first-home buyers and for shophouses, or ruko . While supply in the central business district is low, competition remains tight. Growth in the retail sector, however, is expected to be minimal considering the massive expansion in the past three years.
With Indonesia’s property prices still comparatively low in the region, investors and foreign business groups have their eyes on the potential margins. Domestic investors are seeking shares as well as tangible assets in construction and property, Anton said, citing developers from South Korea who have recently inked property deals in Indonesia.
Budhy Siallagan, a property analyst from E-trading Securities, confirmed the international attention on Indonesian property.
“Indonesia’s property market is the darling of international investors right now,” he said. “I am optimistic the property sector will grow next year. Macroeconomic indicators are positive, inflation is only 6 percent and interest rates are very low. Even related sectors such as iron, steel and cement, for example, are still low.”
Demand for middle- to lower-end residences is still high and supply remains moderate, while market conditions in the high end are stable as developers are using their liquidity prudently, Budhy added.
For commercial properties, the CBD is the golden location.
“This is a sign of strong demand in the sector. Indonesia is lucky as the property crash in the US has made developers more prudent about their expansion plans,”Budhy said, adding that earnings per share have touched 80 percent in the past two years.
For big players such as the Agung Podomoro Group, owned by Trihatma K Haliman, Aburizal Bakrie’s Bakrieland and Mochtar Riady’s Lippo Group, the new year comes with expectations of solid growth.
“Lippo Karawaci is a major player in the industry, and its strong interest in public utility projects such as hospitals and residential developments such as Kemang Village and St. Moritz will target the middle- to high-end market,” Budhy said.
In the pipeline for Bakrieland are projects in the CBD, including the Kuningan and Sudirman area. With its huge land bank, the group is set to woo investors attracted by the soaring value of its assets. The group’s development plans linked to its toll road, such as its Bogor Nirwana Resort that will connect with Ciawi-Tasikmalaya in West Java, are also likely to boost its accounts.
Agung Podomoro Group is focusing on prestigious projects, including its Central Park development, which will be completed in 2011 using funds from its recent initial public offering.