The archipelago’s urban population continues to grow and undergo cultural change
Indonesia is an epic and multi-faceted place
With Indonesia’s affluent middle-class growing rapidly, the nation’s property market looks set to ride out economic difficulties as consumer and investor demand increases
By Cameron Bates
Straddling the equator for more than 5,000 kilometres, Indonesia is an epic and multi-faceted place. Nowhere are its vast contrasts better demonstrated than in the capital Jakarta where luxury vehicles inch through congested streets overlooked by low-paid construction workers labouring on the latest multi-million-dollar, mixed use-development projects.
Despite a downturn in GDP growth on the back of weak consumption, investment and exports, the residential property market continues to remain a bright spot thanks to an expanding middle-class and affluent consumer population, which currently stands at 75 million people and is expected to hit 141 million by 2020, according to a report by leading consultancy firm Boston Consulting Group.
“Indonesian real estate is set for a significant uplift in 2016,” Kian Moini, the co-founder of online real estate marketplace Lamudi, says. “With changes to foreign ownerships laws and various government stimulus packages coming into place, significant growth is predicted.”
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Jakarta, which was named the fastest growing luxury property market in the world in 2014 with price growth of 37.7 percent by Knight Frank, has since seen a decline of 11.2 percent due to a reduced number of expatriate arrivals and business travellers.
Compared to the average global growth of 2 percent, the country’s capital remains one of the hotspots for luxury property in Asia, if not the world.
Located in the mountains, the city of Bandung offers cool respite from the steamy lowlands
Although the slowdown continued in the first quarter of 2015, the property market was forecast to see growth throughout last year. But despite the high demand in the luxury segment, the mass market struggled. As the Lamudi Real Estate Market Report Indonesia 2015 noted: “many people [are]struggling to find housing in the city as real estate developers have been focusing on the luxury market. Moreover, most people do not qualify for subsidised housing from the government.”
The dearth of affordable housing has however resulted in increased demand – and subsequently pricing – in the rapidly expanding satellite cities surrounding Jakarta, notably southern Tangerang and Bekasi in West Java.
Such spikes in several sub-sectors across many cities are expected to continue through 2016, says Johannes Spies, who heads design development for the Hong Kong-headquartered Townland Group and is in charge of the planning and design consultancy’s Jakarta office.
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“Design has grown in diversity and complexity from a focus on mid- to high-end landed residential projects to complex integrated mixed-use developments with housing units across the entire income spectrum, where a single residential unit can cost a total of IDR100 million (USD7,500) or a luxury unit can cost the same per sqm,” he says.
A greater desire for well-constructed and unique developments, according to Spies, will increase also competition among developers particularly in areas of price, funding strategies, conceptualising new ideas and design quality.
“Urbanisation, development demand and property booms will all continue in various sectors with an expected economic recovery in the next three years, but with greater demands on design quality and uniqueness,” he adds. “We will also see new types of residential properties as Indonesia’s urban population continues to grow and undergo cultural change.”
Spies’ firm Townland is involved in multiple projects throughout Indonesia but certain areas in particular have been identified as key areas for future growth – with Jakarta and its immediate environs leading the way.
“We believe that transit-oriented hubs will characterise the urban landscape with developers competing through design and location for their share of this prospective market,” he says.
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Indonesia’s behemoth capital will continue to undergo a major urbanisation-driven transformation, similar to those seen in Shanghai and Shenzhen in China in the coming years, and some of its peripheral cities are already reaping the rewards.
Located on the eastern border within the Greater Jakarta region,Bekasi is the fastest-growing urban centre in Indonesia.Its proximity to toll road and train links to the Jakarta CBD, and the expansion of industrial zones and port developments nearby have made it a popular choice for investors, while
Serpong, also in Greater Jakarta, is another hugely attractive enclave. It was here that developer Summarecon enjoyed one of 2015’s sales success stories with its Rainbow Springs project, which introduced the concept of condo-villas to the area.
Expectations are also high that Bandung, the capital of West Java, will become a model urban development in Indonesia with its architect mayor, Ridwan Khamil, driving an acclaimed smart city initiative, which provides platforms for citizens to actively participate in the city’s development via smart technology and social media.
Property observers have come to expect the unexpected in a country as huge and diverse as Indonesia
While Jakarta and West Java look set to enjoy more growth, the residential property market in Bali, Indonesia’s most potent tourist draw, remains stagnant. Analysts believe that the government needs to invest in tourism infrastructure to counter the decline in commodities.
“New developments like the mixed-use, cliff-side Seven Heaven project in the south of the island – a development that in the past would have been a five-star hotel – will capitalise on the low supply of smaller high-quality units that appeal to both domestic and foreign buyers,” said Spies.
The inauguration ASEAN Economic Community is also expected to boost the local real estate sector in 2016, as well as plans to revise the current foreign ownership laws.
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“A change in foreign ownership legislation will obviously carry momentum but nothing has been finalised yet,” Todd Lauchlan, country head of Jones Lang LaSalle Indonesia. “I think the biggest impact, in terms of market impact, of allowing foreigners to buy will be Bali. The demand is already there but hasn’t really been satisfied by the current structure. It will also unlock other markets that have previously been under the radar.”
With foreign ownership reforms practically in the post and ambitious infrastructure projects underway, President Joko Widodo’s government appears to be making many positive noises to make Indonesia more investor-friendly. Developers, meanwhile, are upping the ante in terms of quality and imagination when it comes to new projects. In a country as huge and diverse as Indonesia, observers have come to expect the unexpected, but all the signs point to a successful 2016 for the country’s real estate sector.
Gerbang tol Cikarang Utama
Which infrastructure projects have gathered pace under the government of Indonesian president Joko Widodo?
Various improvements to toll road alignments and new entry/exit ramps in Java, Makassar (South Sulawesi) and a few other second tier cities in Sumatra and Sulawesi islands
Completion of more sections of the Trans-Java Toll Road
Trans-Sumatra Toll Road (from Lampung to Banda Aceh) with developers already gearing up for developing new satellite towns of more than a 1,000 ha each near toll entry/exit ramps
The Bogor-Ciawi-Sukabumi Toll Road will give access to MNC Land’s Lido Lakes Resort, a 2,000-ha property that will include Southeast Asia’s top theme park and a Trump Luxury Homes estate
Jakarta’s upcoming MRT and LRT stations will be the catalyst for transit-oriented mixed-use developments near stations
Leading the transit-oriented development drive, developers of satellite townships like Summarecon Bekasi and Citra Maja Raya have government approvals to extend station development links to their properties, providing much quicker access to Central Jakarta
Though it remains controversial, a high-speed train proposal linking Jakarta and Bandung will see thousands of hectares on new developments near new stations such as Halim, Karawang, Walini and Tegal Luar
The full version of this article originally appeared in Property Report magazine issue no. 135.
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Source : property-report.com
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