Abstract
The Indonesian central bank reduced its benchmark interest rate in early June
for a seventh straight month
by 25 basis points to 7% to help spur
economic growth. The economy has been struggling to achieve its
4.5%
economic growth target this year amid the global recession. Consumer prices
rose 6% in May yearon-
year (y-o-y) after increasing 7.3% in April.
Indonesia' s economy grew 4.4% in Q109 thanks mainly to consumer and government
consumption. The
central bank predicts the country' s economy will grow 3%
to 4% for FY09.
The tight credit situation has stalled many property
projects at the initial stages. Delayed projects, due to
difficulty in
acquiring financing due to the economic climate, will help put a floor under
occupancy and
rental rates for Jakarta offices, according to commercial
real estate agent Colliers International.
There has been a slowdown in
office leasing activities, although rental values appear to have
stabilised
after growing in Q109. While not as severely affected by the
economic recession as other South East
Asian economies, the business
climate remains challenging.
Average occupancy rates of Grade A office
space hovered around 90%, according to property agent DTZ,
although a
report by the firm noted the on-going uncertainty in the marketplace. Average
rental values are
around IDR168,000 (US$15) per square metre (sq m) per
month. The adverse affects of the slow
economy and uncertain business
climate on the office market are expected to continue for the rest of
2009.
The residential market has been affected by slow take-up, not just
because of the economic climate, but
due to uncertainty during an election
this year (to be held in early July 2009). Property professionals
report a
large number of buyers putting purchases on hold and sales activity was
moderate in H109. That
said, there has been little sign of price falls for
condominiums in the primary market.
However, DTZ has reported corrections
in the secondary market condominiums, particularly for twobedroom
units.
Sales activity is expected to slow further and prices remain generally
flat.
Retail demand in H109 remained stable with average occupancy of
prominent malls in Jakarta being
around 95%, according to DTZ. Rental
rates in local currency terms have fallen nearly 3% in 2009 for
ground
floor space in prime malls, although much of this can be attributed to a
depreciating rupiah against
the US$. The pipeline of new mall developments
in 2009 and 2010 is significantly lower due to delays in
completion in the
face of the economic climate.
Office rent prices are expected to remain
stable, or at least not to decline sharply, for the rest of the year.
In
the residential segment, prices are expected to stay relatively flat for the
rest of 2009.
The outlook for the retail segment is less bright.
Relatively high interest rates and difficulties in securing
financing in
the current climate are expected to lower prices.
While a change in
foreign property ownership laws would be likely to boost the sector, there are
few
signs that the government has the political will or ability to do
this.
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