With supply abundant, new Jakarta MRT yet to impact property prices, says Colliers

Property services firm Colliers International Indonesia said the average price of apartments and office space in Jakarta has yet to increase despite the completion of the highly anticipated MRT.
Property services firm Colliers International Indonesia said the average price of apartments and office space in Jakarta has yet to increase despite the completion of the highly anticipated MRT.PHOTO: AFP

JAKARTA (THE JAKARTA POST/ASIA NEWS NETWORK) - The average price of apartments and office space in Jakarta has yet to increase despite the completion of the highly anticipated MRT, according to property services firm Colliers International Indonesia, adding that an uptick is expected in the future.

"The asking price (for apartments around MRT stations) has increased, but that does not mean that selling prices have increased," said Mr Aldi Garibaldi, senior associate director investment service at Colliers International Indonesia.

According to Colliers International, the gap between a large supply and soft demand was the major cause of stagnant growth for apartment prices in Jakarta in the first quarter of 2019.

The firm, which offers advisory and research services, expects growth to ease to 3 to 4 per cent this year on the back of weak demand and uncertainty in a political year, and increase gradually by 5 to 6 per cent from 2020 to 2021.

"We project that until the end of 2019, the outlook for apartment (prices) would be somewhat stagnant because many investors are taking the wait-and-see stance," Colliers International Indonesia senior associate director Ferry Salanto said.

According to data from Colliers, there will be 37,124 apartment units completed in 2019-2021, consisting of 15,821 in 2019, 11,834 in 2020 and 9,469 in 2021. In the first quarter alone, there were an additional 1,847 apartment units in Jakarta.

Bank Indonesia's (BI) macroprudential policy in terms of relaxation of loan-to-value (LTV) has been unable to boost the sales of property either because the interest rates for home mortgages were still high.

"Even though the down payment is low, if the interest rates remain high, it would not be able to boost property sales," Mr Ferry said.

The government issued Government Regulation No. R377/AJ.208/BPTK/2017 on technical guidelines for developing the transit-oriented development (TOD) residential areas in Greater Jakarta.

 
 
 
 
 

Several developers are engaged in building residential properties close to these stations. The TOD concept integrates residential areas with public transportation, so the tenants of these residential structures, mostly apartments, will have easy access to public transportation.

The Jakarta administration has planned to raise the taxable value of property of buildings affected by the MRT project by up to 30 per cent.

The increase will apply to areas along Jl Jendral Sudirman in Central Jakarta, which will see the tax increase to 97.5 million rupiah (S$9,300) per square metre from the current 75 million rupiah.

Apart from weak demand for apartments, the office market is also experiencing an oversupply, with about 680,000 sq m of office space expected to go on the market this year, 7.3 per cent higher than in 2018.

In the first quarter of 2019, the average occupancy rate for office buildings in the central business district (CBD) area was registered at 82.5 per cent. Colliers forecasts that by the end of this year, with huge additional supply, the occupancy rate would drop to 81.5 per cent.

Similarly, outside the CBD area, the occupancy rate is expected to drop 3.5 to 4 per cent by the end of 2019, from 84 per cent in the first three months this year.

Co-working spaces have mushroomed in Jakarta, particularly in the CBD area. Companies that provide shared workspaces are being aggressive in renting office space not only for technology companies but also for big conventional firms.

"The need for co-working spaces remains high because some companies want flexibility. Many big corporations want a short-term lease of fewer than three years," Mr Ferry said.

In addition, the demand for swing space is also coming from state-owned companies. While their offices are being renovated, these state-owned companies can move temporarily to co-working spaces.