Jakarta luxury property sales have yet to see significant improvements, according to new research.
Currency depreciation, a relatively subdued economy and adjustments to taxes have caused buyers to be cautious.
Sales in the Jakarta luxury property sector have yet to significantly improve as sentiment remains weak, according to real estate firm JLL in its Asia-Pacific Property Digest report looking at the second quarter of the year.
In 2Q 16, sales demand remained strongest in the middle and middle-low segments where affordability is greater and the tax burden lower.
Demand for serviced apartments continued to be driven by embassy staff and corporate employees on short-term contracts.
Downsizing in the oil and gas and mining industries were such that demand from these segments has dried up in the Jakarta luxury property sector.
SEVERAL MIDDLE AND LOWER-MIDDLE CONDOMINIUM LAUNCHES
No new serviced apartments or luxury condominiums were physically completed in 2Q 16, noted JLL.
As luxury condominium demand has been weak since the middle of 2015, few high-end projects have been launched since that time.
Serviced apartment vacancy rates remained in double digits in 2Q 16 and several serviced apartment operators are now accepting shorter contract periods.
Daily and weekly rates are now common in some projects as landlords try to achieve target occupancy levels.
STRONG INSTITUTIONAL INVESTOR INTEREST IN CONDOMINIUMS
The long-awaited tax amnesty bill was passed in June. While implementation and market reaction remain uncertain, there is the potential for huge sums of capital to be repatriated and ultimately invested in property.
Indirect benefits should also be felt in terms of improving sentiment in the residential market on the back of rupiah appreciation.
Double-digit serviced apartment vacancy rates were such that landlords were cautious about raising rents in 2Q 16 and rental levels remained flat quarter-on-quarter.
While the serviced apartment supply pipeline remained thin, developers continued to express strong interest in the condominium market.
OUTLOOK: MEDIUM- TO LONG-TERM DEMAND FOR CONDOS TO IMPROVE
The real estate firm said that it believes persisting weak demand for Jakarta luxury property is due to sentiment rather than affordability.
Continued stability in the USD/IDR exchange rate, an improving macroeconomic environment and clear communication on future adjustments to taxes will likely improve buyers’ confidence.
It added serviced apartment rents are likely to decline over the next 12 months as vacancy is likely to remain relatively high.
Low commodity prices are expected to continue to impact the oil and gas and mining sectors, meaning expat demand from this segment is likely to remain weak.
In summary James Taylor, Head of Research, Indonesia, said: “The long-awaited tax amnesty has the potential to kick-start growth in the luxury condominium market.”
