Real estate prices heating up in Indonesia

Reading Time: 2 minutes

jakarta-indonesia-construction-workersRising property prices in Indonesia are starting to cause concern whether the sector is starting to heat up to an extent that might cause a real estate bubble.

High rents and prices, at least compared to previous levels in Jakarta, have been the subject of particular scrutiny because real estate helped cause a financial collapse in the late 1990s and because the currency has been one of the hardest hit among emerging markets in recent months.

Rents per square foot for downtown grade B commercial real estate have roughly doubled in local currency terms over the last three years and nearly tripled for scarce grade A space. They have not yet shown signs of weakening, real estate brokers and developers said, even though investors have shifted tens of billions of dollars from emerging markets to the US and other industrialised countries in response to somewhat higher long-term interest rates there.

But while skyscraper construction projects are slowing or stopped in big Indian cities like Mumbai, tower cranes in Jakarta are still floodlit at night so that workers can keep building long after sunset. The difference reflects continued foreign investment in the Indonesian economy and a diversified domestic economy.

The Lippo Group, the sprawling conglomerate that is one of Indonesia’s largest real estate developers, is still planning to begin preselling offices in two commercial real estate projects in the coming months, which will then take about three years to build.

While Jakarta real estate prices may be rising, they are doing so from a very low base and remain among the cheapest in East Asia. Even after recent appreciation, the rule of thumb here is that condominium prices, at $372 to $418 per square foot, are one-seventh of comparable prices in Singapore and a tenth of comparable prices in Hong Kong.

Commercial real estate prices are seven times higher per square foot in Singapore than in Jakarta and 14 times higher in costly Hong Kong.

Bank lending to real estate has been heavily regulated ever since the Asian financial crisis in 1997 and 1998. Bank Indonesia, the country’s central bank, now requires commercial banks to get down payments of 30 per cent for residential mortgages. Banks commonly demand 50 per cent down payments for commercial mortgages, and many demand additional collateral beyond the project itself.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid

Reading Time: 2 minutes

Rising property prices in Indonesia are starting to cause concern whether the sector is starting to heat up to an extent that might cause a real estate bubble.

Reading Time: 2 minutes

jakarta-indonesia-construction-workersRising property prices in Indonesia are starting to cause concern whether the sector is starting to heat up to an extent that might cause a real estate bubble.

High rents and prices, at least compared to previous levels in Jakarta, have been the subject of particular scrutiny because real estate helped cause a financial collapse in the late 1990s and because the currency has been one of the hardest hit among emerging markets in recent months.

Rents per square foot for downtown grade B commercial real estate have roughly doubled in local currency terms over the last three years and nearly tripled for scarce grade A space. They have not yet shown signs of weakening, real estate brokers and developers said, even though investors have shifted tens of billions of dollars from emerging markets to the US and other industrialised countries in response to somewhat higher long-term interest rates there.

But while skyscraper construction projects are slowing or stopped in big Indian cities like Mumbai, tower cranes in Jakarta are still floodlit at night so that workers can keep building long after sunset. The difference reflects continued foreign investment in the Indonesian economy and a diversified domestic economy.

The Lippo Group, the sprawling conglomerate that is one of Indonesia’s largest real estate developers, is still planning to begin preselling offices in two commercial real estate projects in the coming months, which will then take about three years to build.

While Jakarta real estate prices may be rising, they are doing so from a very low base and remain among the cheapest in East Asia. Even after recent appreciation, the rule of thumb here is that condominium prices, at $372 to $418 per square foot, are one-seventh of comparable prices in Singapore and a tenth of comparable prices in Hong Kong.

Commercial real estate prices are seven times higher per square foot in Singapore than in Jakarta and 14 times higher in costly Hong Kong.

Bank lending to real estate has been heavily regulated ever since the Asian financial crisis in 1997 and 1998. Bank Indonesia, the country’s central bank, now requires commercial banks to get down payments of 30 per cent for residential mortgages. Banks commonly demand 50 per cent down payments for commercial mortgages, and many demand additional collateral beyond the project itself.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid