Apartment rentals are not as brisk as apartment sales. The huge supply has made the apartment business targeted at expatriates quite slow. By the end of 2007, the occupancy of apartments went down 3.5 percent, meaning total occupancy was only 71.5 percent, down from 74.8 percent in 2006. Occupancy of apartments for lease also went down sharply as a huge number were available.
In the same period, another 1,770 apartments became available while demand was only for 386. Serviced apartments have also experience a similar fate, although expatriate demand has been more or less stable. However, the supply of serviced apartments is much higher than demand, reaching only 5.1 percent in 2007, indicating that tenants were simply moving from one apartment to another.
By the end of 2007, the occupancy rate for condominiums for lease was 70.95 percent, serviced apartments 69.77 percent and leased apartments 78.27 percent. An additional 1,933 leased apartments came on the market, 92 percent of which were condominiums for lease, an increase of 24.6 percent from 2006, which exceeded the demand of only 19.1 percent. In the next two years another 1,735 serviced apartments will come on line, not to mention condominiums for lease.
However, although there is an imbalance between supply and demand noted operators are handling the prices well and there has been an increase of 6.7 percent in the U.S. dollar tariff in the past 12 months. Condominiums for lease will not enjoy the same condition due to the huge supply.
Prices in U.S. dollars have not gone up, while the rupiah price has only increased 3 percent. However, due to inflation there has been some increase dollar-wise, 2.7 percent, and 7.2 percent in the rupiah bracket. The general prediction is that there will be stiff competition in the future due to the big supply of apartments.
We will also see a significant increase in the supply of middle and low segment condominiums. Mixed-use condominiums will also emerge more in the Central Business District. On the outskirts, meanwhile, more low-cost apartments will be built. With worsening traffic conditions and the limited supply of land in the city, expatriates, who are the main target for serviced apartments, will in one way or another occupy most of the available apartments here in increasing numbers. (Arief Rahardjo, associate partner, strategic consulting, PT Property Advisory Indonesia – Provis).
The Jakarta Post, February 05, 2008
