The Komodo
On the ground in Indonesia
Wednesday, 13 October 2010
Please see important notice on last page Page 1 of 6
STREET SCENE
House warming
Property agents in Jakarta are having a field day
Mita Valina Liem (6221) 25548829 mita.valina.liem@clsa.com
Property agents in Jakarta are having a field day. We spoke with property
agents across Jakarta who indicated prices had risen an average of 20% in
the past year. In some areas such as in South Jakarta’s Sri Wijaya, prices
for landed houses have jumped up to 40%. A combination of higher
earnings, a young population, easy financing and tight supply has been the
main driver to higher prices. West Jakarta is also the fastest growing part
of the city; good news for Summerecon, Bumi Serpong and Alam
Sutera.
Talking shop. We talked to 14 property agents including from Ray White,
Century 21, Era Max and Housemart to get clearer picture of property
market across Jakarta. The areas we visited account for around 12% to
15% of the total property market. We learned that prices for a ruko
(shophouse) are also rising by around 20%. Demand for serviced office
space is also increasing according to Jones Lang LaSalle.
Stringent rules boost property prices. Local governments have been
firm in the last few years in clamping down on illegal business activities in
residential areas in parts of Jakarta, particularly South and Central Jakarta.
This has boosted property prices in other parts of Jakarta including Melawai,
Panglima Polim and Tendean where people can open business and live in
the same place.
Moving west. There is a trend in the market that people are moving
toward the outskirt of Jakarta. Bumi Serpong (BSDE IJ - Rp1,060 - BUY),
and Alam Sutera (ASRI IJ - Rp250 – NR) are two popular residential areas
at the moment because they have easy access to toll roads, modern health
and education facilities. Property demand at TB Simatupang has also been
growing fast as it is close to the Jakarta Outer Ring Road allowing
commuters to save time on the road.
But not for high-end apartments. Supplies for apartments in South
Jakarta, however, have exceeded demand especially for the high end which
cost more than Rp2bn (US$220k) per unit. Investors only make a slim
profit of around 5% for 2 years. There is however steady demand for lower
cost apartments such as those offered by Bakrieland (ELTY IJ - Rp179 -
BUY).
No change in law, yet. Although foreigners cannot yet buy Indonesian
property directly, the government is still working towards liberalizing the
domestic real estate market. It aims to secure up to 90 years of leasehold
for foreigners. However, this may take longer than expected and there may
be some changes along the deliberation. But should the House of
Representatives approve the proposal, this would be an additional catalyst
to the market.
Rosy future ahead and what to play? With 1.3% CAGR growth in
population, low mortgage rate, benign inflation and greater access to
financing schemes, the property sector has plenty of room to grow. We like
Bumi Serpong, Summarecon Agung (SMRA IJ - Rp1,120 - BUY). Alam
Sutera also has developments in West Jakarta, along with Ciputra
Development (CTRA IJ - Rp430 - SELL).
CLSA has a long journalistic history.
This ad hoc piece is written by CLSA’s own inhouse
journalist with information gathered from
independent on the ground sources. This note is
produced independently of our financial analysts
and is intended to provide more colour and detail
to trends in the marketplace.
Property prices 2009 vs 2010
up 30%
up 20%
up 40%
Source:BPS
Shop houses at Ciputra in Palembang
Source:CLSA Asia Pacific Markets