Expat demand for CBD flats boost rents
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Cost of apartments goes up by more than 14 per cent in the second quarter amid limited supply
Strong demand from expatriates, particularly European, Indian, Japanese, Saudi Arabian, South Korean and US citizens, has pushed Jakarta’s apartment rental rates up by 14.61 per cent compared with the same period last year, a recent Bank Indonesia (BI) survey showed.
According to the survey, the sharp increase in rents for upscale apartments in Jakarta is due to the fact that expatriates prefer to live near the business districts in the capital, where supply is limited.
As of the end of the second quarter, the number of leased apartments stood at 11,782 units, and demand from expats pushed rents to an average of US$18.23 (Bt579) per square metre, up 14.61 per cent from the same period last year.
The survey noted that most expats rented apartments located in Jakarta’s central business district (CBD).
Indonesia Property Watch executive director Ali Tranghanda told The Jakarta Post on Wednesday that the lack of leased apartments was due to ongoing projects of strata-title condominiums, particularly in South Jakarta.
“In addition, more expatriates prefer to rent apartments near business centres in the capital as our economy grows stronger. Hence, the rise in rental costs,” he said, adding that around 45,000 expatriates currently resided in upscale apartments in Jakarta.
Tranghanda said this situation provided a potential business opportunity for investors who purchased middle to upper-scale apartments from ongoing projects.
Separately, Colliers International’s associate research director, Ferry Salanto, said the growing demand from expats to rent upscale apartments was a sign for the government to allow foreigners to own condominiums in Indonesia.
“I think expatriates would contribute more to state income through taxes if they were allowed to actually own the apartments. But, of course, there should be strong measures in place before doing that,” he said.
In the past, efforts to open the property market to foreigners were hampered by a prohibition on land ownership, which remains intact as demanded by existing laws.
Currently, the government is mulling a regulation to overcome that problem by simply providing foreigners with the right to apply for the purchase of a Building Ownership Certificate, which would be separate from land rights.
In another survey, the volume of residential property sales in the second quarter of this year dropped by 4.55 per cent compared to the first quarter. Sales of medium-level houses, according to the survey, saw the biggest downturn by 18.24 per cent compared to the first quarter.
Apart from the new school year and the Eid holiday, the drop in residential property sales has been attributed to a new policy introduced in June this year, which increases the minimum down payment for 70-square-metre houses from 20 per cent to 30 per cent. This adds a burden to consumers, especially those in middle- to low-income brackets.
The survey, which was released last week, shows that in the second quarter of this year, a total of 1,261 condominiums were built in the CBD and 879 were built in non-CBD areas in Jakarta.
These new buildings increased the cumulative condominium supply in the second quarter to 82,683, up by 2.66 per cent from the first quarter.
