An Urban Revolution
    Category: Column By : Todd Lauchlan Read : 823 Date : Friday, November 14, 2014 - 06:47:12

    I was at a wedding in September here in the Indonesian capital when I realized how Jakarta, and the country in general, is being transformed. The son of a prominent client was getting married, having spent his life living at home. I knew that the father’s side of the family had bought an apartment for him and his new bride in a new development downtown. The couple would be living in Verde, a chic, sleek glass-and-concrete tower in the central business district, yards away from major shopping malls. They wanted to be close to work and close to play. And they’re not alone.

    We are seeing a dramatic reshaping of Indonesian society, in where people want to live, who they want to live with, and how they want to live. Gone are the days of three generations living together. The country is transforming, as young couples, nuclear families and empty nesters become the norm. Those who once lived a long way from the city are moving into town and looking for an apartment near their work.

    The average age in Indonesia is 27. These young people are choosing a more urban lifestyle near their place of work—and that’s having a profound impact on the real-estate industry. The third quarter set a record for condominium sales in Jakarta, with 4,900 units sold in those three months alone. And it’s not just the “1%” of wealthiest Indonesians driving the trend—the bulk of new units this year have been middle-tier apartments, and have been the largest share of the market in all but two of the last nine quarters. This trend is a real-estate revolution, that promises to reshape the way the country lives and works. Jakarta is the most obvious example, but expect other cities to follow suit, such as Surabaya and Bandung.

    This trend is a major opportunity for developers and investors. Jakarta has at times lead the world in terms of year-on-year price growth for both residential and office property. Thanks to the strong macroeconomic fundamentals driving the market, it ranks 12th globally in Jones Lang LaSalle’s most recent City Momentum Index.

    But Jakarta, like its South American counterpart Lima—which shows many of the same characteristics—both epitomize the massive challenge of high-growth cities. Tellingly, both cities are now run by populist city-leaders who focus on tackling corruption and poverty, and on building sustainable communities. It’s a big job to get these sprawling cities to develop in a more coherent way.

    Issues such as traffic congestion only increase the desire of urban office workers to live nearer the center of the city. Jakarta is already becoming more “vertical.” The good news is that apartment prices are currently advancing at a reasonable pace. But there’s no doubt that the market is going through a structural shift towards more urban, high-density living. McKinsey forecasts that another 90 million Indonesians will join the “consuming class” by 2030—a rate of change only behind China and India. But with China’s growth slowing, and India continually caught in a fuddle of red tape, Indonesia may be the “sleeper” success of the region, and indeed of emerging markets in general, over the next two decades.