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Indonesia's Property Sector Sees Growth Picking Up in 2011: Bakrieland
Dion Bisara & Antara | January 09, 2011

A worker cleaning a building in Jakarta. The Public Housing Ministry has estimated property sales at around Rp 90 trillion ($10 billion) last year, an increase of 15 percent from a year before. (JG Photo/Safir Makki) A worker cleaning a building in Jakarta. The Public Housing Ministry has estimated property sales at around Rp 90 trillion ($10 billion) last year, an increase of 15 percent from a year before. (JG Photo/Safir Makki)
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sempre
6:44am Jan 10, 2011

Another bubble economy is coming then followed by foreclosures ?

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Indonesia’s property sector is expected to grow around 20 percent to 30 percent this year on the back of a strong economy and low interest rates, a top executive said on Saturday.

“Housing demand is still quite high, and on the other hand the economy keeps improving and the rate of housing credit is reaching its lowest point. The property business will be booming in 2011,” said Hiramsyah Thaib, the president director of Bakrieland Development.

“With increasing indicators of public economic capacity, it is not impossible that the industry could achieve 20 to 30 percent growth in 2011,” state-run news agency Antara quoted him as saying on the sidelines of a meeting of alumni from the 1981 class of the Bandung Institute of Technology (ITB).

The Public Housing Ministry has estimated property sales at around Rp 90 trillion ($10 billion) last year, an increase of 15 percent from a year before.

“Clearly some sectors have grown, indicated by motorbike and car purchases, in the past five years. We believe in 2011 the turn will be for the property industry,” Hiramsyah said.

Housing demand reached eight million units in 2010, he added, while public purchasing power continued to increase while aggressive lending in the property sector brought mortgage rates down to between 9 and 11 percent.

Part of the growth, he said, was because the economy had largely escaped the worst of the 2008 economic crisis.

The property sector was lifted by developers using their own funds, he said, unlike during the 1998 crisis, when the industry relied on funds from banks.

Panangian Simanungkalit, a property analyst and consultant with Panangian Simanungkalit & Associates, said that despite a possible rise in Bank Indonesia’s benchmark interest rate, lenders would likely keep their mortgage rates at reasonable levels.

“Banks are now very competitive in mortgage lending, so I don’t see why they would raise it too much this year,” Panangian said.

The central bank said last week that it would keep its benchmark rate at a record-low 6.5 percent despite growing inflationary pressure.

Banking on the buoyant outlook for the property sector, Bakrieland, the nation’s second-largest property firm by assets, has already budgeted Rp 2 trillion to Rp 2.5 trillion ($222 million $277 million) for expansion this year, Hiramsyah said.

The company’s projects include Sentra Timur in East Jakarta.

The development includes three towers, with each housing 300 condos, and ground is to be broken this year.

“The government policy that supports especially the growth of flats has helped boost the industry despite obstacles of inter-sectoral synchronization and coordination and central-regional policy differences,” he said.