10 March, 2017

Investing in Jakarta’s Property Market

PROPERTY

The property market in Indonesia — especially within Greater Jakarta — is ripe for the picking.

Indonesia is Southeast Asia’s largest economy with region’s largest population. It also has the region’s highest proportion of youths under 35. These factors combined, have made Indonesia the investment destination of choice for foreign investors keen to reap the benefits of a growing economy. Many opportunities exist across a myriad of sectors, chief amongst which is property.

Economic growth targets are set at 5.3 per cent for 2017 and more than 6 per cent for 2018. With a growing economy and population, the need for housing has become increasingly urgent, especially for the capital city, Jakarta. According to Jakarta’s Regional Development and Planning Board (Bappeda), the city has more than 10 million residents. The influx of Indonesians and foreigners alike has created an acute housing shortage within the city. Real estate consultancy Colliers International Indonesia counts more than 120 apartment projects in Jakarta slated for completion in 2019. Many more are in the pipeline.

Most of these projects are situated just outside the central business district (CBD) and are intended to cater to the middle and upper-middle classes. Living in an apartment has become the choice of Jakartan elites. It means greater comfort and less hassle, qualities that are popular with Jakartans. Colliers International Indonesia’s senior research director Ferry Salanto believes that the demand for residential property in Jakarta will stay high. The exchange rate stability and improving macroeconomic environment will also contribute to the increase in the average take-up rate.

“The market is starting to recover from the economic downturn in the last few years. Prices are competitive and demand is plentiful. The prospect of capital gains over the next three to five years is positive,” he said.

The average yield for apartments in Jakarta is between 5 to 8 per cent per year, on par with Kuala Lumpur but lower in price.

The research chief of Cushman & Wakefield Indonesia, an investment and consultancy agency, Arief Rahardjo, believes that housing demands in Greater Jakarta are arguably the highest in the country.

“It’s an appealing opportunity because the prospect for capital gain is huge. The average capital gain for the market is 30 per cent for three years or about 10 per cent per year,” he said.

Cushman & Wakefield’s figures show that the total rental for Jakarta’s apartments has grown 0.2 percent quarter-to-quarter to US$21.4 million during the third quarter of 2016. The total rental figure for serviced apartment in Q3 2016 also increased by 1.4 per cent to US$29.5 million. They company expects this trend to continue.

Rahardjo added that the development of public transportation projects, such as the Light Rail Transit (LRT) and Mass Rapid Transit (MRT), as well as commuter line trains connecting business districts in the city with the suburban areas and satellite towns, is another plus for the property market in the long term.

Location and facilities are the most important criteria for housing, said both Salanto and Rahardjo. They also agreed that South Jakarta and South Tangerang are the best areas for investing in residential property at the moment. However, there are other locations that offer considerable growth potential and future capital appreciation. Investors can consider these five prospective residential areas.


Simatupang

One of the business corridors in the capital and surrounded by toll roads connecting to all of Greater Jakarta. It is also close to international schools, malls, and the LRT.


Pondok Indah

It is the preferred choice of multinational companies, international schools and expatriate communities. Close to the MRT project connecting the suburb with Bundaran HI in the city center.


Bumi Serpong Damai (BSD)

This massive residential complex located in South Tangerang consists of landed house clusters, apartments, malls, schools, offices, and hospitals. New apartment projects emerge there every year. It is a model for Indonesia’s future cities.


Alam Sutera

A few kilometers apart from its neighbour BSD, Alam Sutera is regarded as an important satellite town of Jakarta. It consists of all the characteristics of BSD and more, including landed house clusters, townships, high-rise residential property, mall, education institutions, offices, and medical facilities.


Thamrin


Located at the very heart of Jakarta, this area has it all for both locals and expatriates. This area is the one of major CBDs in Jakarta. It contains many goverment office, houses the luxurious Grand Indonesia and Plaza Indonesia malls, and is well-connected to Jakarta’s satellite cities via an array of public transportation system. The future MRT will also pass through this area, increasing its buzz, accessibility and investment potential.