Developers shift to lower-end housing as economy slumps
Developers are moving to cater to the growing middle- and lower-segment housing market as demand for upscale residences drops on this year's slowing economy.
HM Hidayat, secretary-general of the Association of Housing Development in Indonesia, said on Tuesday that while demand for high-end housing had declined steeply, that for lower- to mid-market housing had almost doubled.
"Many developers who used to target the upper segment are now going after the mid- to low segment. That’s the trend," he said on the side-lines of a Jakarta Property Week event on Thursday.
According to Hidayat, 250,000 houses were built last year for the upper as well as the middle and lower segments.
As of July, 400,000 houses had been erected for the middle and lower segments only, many as part of the government’s programme to build a million homes.
Developers in the association had planned to build 65,000 houses this year, but with higher demand, the association has increased the target to 150,000 houses.
This trend would probably offset slowing sales of high-end houses.
The growing demand for middle- to lower- segment houses was also driven by a backlog of housing needs standing at about 13.5 million units, according to the Public Works and Public Housing Ministry.
Government incentives for the development of housing for the poor under the one-million-house programme launched in April have also contributed.
The statement corroborated data from Indonesian Property Watch showing that of total property sales in Greater Jakarta of 2.5 trillion rupiah (Bt6 billion) in the first quarter of the year, upper-segment housing declined from 45 per cent to 15 per cent.
The sales composition of the mid-segment, priced from 500 million to 1.5 billion rupiah, increased to 45 per cent from 30 per cent, while the low segment, priced below 500 million rupiah, increased from 25 per cent to 40 per cent.
The economic slowdown has hit the property industry hard, with sales in the second quarter growing 10.8 per cent, compared with 26.2 per cent in the first quarter, according to a Bank Indonesia Residential Property Survey.
Indonesian Real Estate had reported a 50-per-cent sales decline over the year.
Tulus Santoso, director and corporate secretary of Ciputra Development, the holding company of major developer Ciputra Group, said the company was focusing on developing the mid- to low segment this year, as these segments were deemed more stable in the current economic situation than the upper segment.
