Apartment sales in Jakarta slumped in the first half of this year, due to a lack of confidence among top-tier buyers to commit to big-ticket purchases amid economic and political uncertainty, property consultancy Jones Lang LaSalle said on Wednesday (18/07).
However, the silver lining is that demand for lower- and middle-class apartments has kept growing, although it was barely enough to curb a further sales decline in the rest of the year.
Developers sold 2,100 units in the country’s largest property market between January and June, which is 6.2 percent less than in the corresponding period last year, Jones Lang LaSalle said in the report.
The slump was mainly cause by a decline in sales of the most expensive units, the consultancy said. The government imposed a 20 percent luxury tax on sales of apartments worth Rp 10 billion ($694,000) or more in March last year, further curbing top-tier buyers’ appetite for new apartments.
“For most people, the condominium is the part of an investment,” Vivin Harsanto, head of advisory at Jones Lang LaSalle, said on Tuesday.
“In the first half of this year, they were still not confident enough because of volatility of the rupiah, and they also held off purchases of investment products due to the fasting month and the Idul Fitri celebration,” she said.
Vivin said there is always a slowdown in apartment sales during Ramadan as consumers are usually more focused on other needs, such as going on holiday and the Idul Fitri celebration.
Still, demand for lower-cost apartments – priced between Rp 300 million and Rp 500 million – remains robust and growing. Cleon Park, a middle-class apartment project in East Jakarta by listed property developer Modernland Realty, was sold out when it launched in May, according to Luke Rowe, head of residential project marketing at Jones Lang LaSalle.
The consultancy said in the report that there might be an improvement in property demand as some large, reputable developers offer units close to public transportation, such as the mass rapid transit and light rail transit systems, currently under development in Jakarta, while smaller developers are offering more affordable units.
Bank Indonesia has dropped its requirement for mortgage down payments in April this year. It formed part of the central bank’s effort to ensure domestic economic growth after it had to increase its benchmark interest rate by 100 basis points in the preceding three months to maintain economic stability amid global capital outflows.
Still, Vivin said she does not expect the central bank policy to significantly impact current sales trends, which have been on a decline since 2014.
“[Apartment buyers] want to see a stable rupiah and a steady political situation as we enter an election year in 2019,” she said.
According to research by Jones Lang LaSalle, apartment prices in the greater Jakarta area are expected to remain flat amid weak demand for the remainder of the year.
Developers only built 1,292 units between January and June this year, bringing the number of total unsold units to 144,000. In the same period last year, developers built 4,843 units, resulting in total stock of 134,536 units.