Property takes a breather
    Category: Column By : Todd Lauchlan Read : 1001 Date : Monday, November 04, 2013 - 08:17:06

    For my last column of 2013, I will look back on the predictions made last year and see how they did, and once again stare into a murkier crystal ball for 2014. Last year we forecast a continuation of trends seen in the last two years, and up until the third quarter, this proved accurate. However the real estate market has now started to slow down. While unforeseen, the market had been slightly overheating, with “irrational exuberance” found in some frothy prices. Yet in this tougher market, I remain optimistic about the market's fundamentals. For individual sectors:

    Jakarta CBD Office Market (inside the “Golden Triangle”):

    Our forecast rental/price increase of 27% proved accurate with both rentals and prices rising 28% year on year. We also forecast increased rents in older buildings, which duly rose 13% for the year. For 2014 the slowdown and elections will crimp the market with total absorption dropping from the record levels of the past three years.  However with occupancy at 93% and limited supply, rentals and prices should rise, especially in Jakarta's premium addresses, by 15% for 2014, most likely towards the end of next year after the elections.

    Jakarta Non-CBD Office Market (outside the “Golden Triangle”):

    Last year we forecast the ongoing rise in rentals and pricee in non-CBD and we continue to see this, as clients look for more affordable space in the south and west.  As with the CBD, we anticipate levels to moderate in 2014 but with continued high demand and constrained supply, prices should keep moving upward.

    Apartments for Sale:

    Last year we proved correct in predicting more high-rise living. Numerous new projects were easily sold, with clearance rates are at an all-time of 75% and our forecast of a 6% price rise being too conservative as prices have risen 15% so far this year. Again we have begun to see some slowdown as unit sales have dropped and prices stabilized. The market has taken a “breather,” and should rise again after elections.  

    Retail Malls:

    Mall owners and developers will benefit from the increased occupier interest both from existing and new retailers. Our forecast was for rents to rise 9%, which was on the money. In 2014, we should see more of the same with occupancy levels near highs of 93%. Once again our forecast is 9% based on high occupancy rates and limited new supply.  

    Tourism Real Estate:

    A new forecast for 2014. The tourism sector continues to perform strongly with increased domestic and international tourism, helped by a weaker rupiah. Bali has especially benefitted, with a building boom of new hotels and resorts. We have done business in Bali since the late 1990s and see a record year this year. 

     

    Three new predictions:

    1. Front Office / Back Office:

    A global trend that includes Jakarta is the rising cost of downtown space driving companies to shift non-core functions to cheaper suburban locations.

    2. Rising Secondary Cities:

    Cities such as Surabaya, Medan, Bandung and Makassar will continue to grow and mature. 

    3. International Investment:

    International investors will keep coming into the market with some high profile deals expected within the next 12 months.

    We foresaw 2013 to be a good year and broadly speaking it was, despite the current unforeseen headwinds. Next year will be a more challenging one with a cyclical slowdown and elections, causing a “wait and see” attitude, though long-term we remain positive.



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