Last year, combined marketing sales for major Indonesian property developers — including Alam Sutera Realty, Lippo Karawaci, Bumi Serpong Damai, Pakuwon Jati, Modernland Realty, Summarecon Agung and Ciputra Development — fell 12 percent year-on-year due to weak domestic demand for housing. (ID Photo/David Gita Roza)

Policies Time Lag Expected to Drag Property Price Growth This Year: Fitch

BY :TABITA DIELA

APRIL 09, 2016

Jakarta. Property price growth will remain sluggish this year due to time lag of government reform in the property sector to take effect and a supply glut in the office and condominium space.

International rating assessor Fitch Ratings said on Friday (08/07) in its report Indonesia Property Watch, that residential property price growth slowed to 4.6 percent on an annual basis in the fourth quarter last year, from 5.5 percent in the previous quarter.

Last year, combined marketing sales for major Indonesian property developers  including Alam Sutera Realty, Lippo Karawaci, Bumi Serpong Damai, Pakuwon Jati, Modernland Realty, Summarecon Agung and Ciputra Development  fell 12 percent year-on-year due to weak domestic demand for housing.

To boost overall demand in the economy and property sector in particular, the authorities has been encouraging local banks to cut down their lending interest rate  following Bank Indonesia, the country central bank's, move in slashing benchmark interest rate by 75 basis points so far this year to 6.75 percent.

Also, the Finance Ministry has scrapped double taxation for real estate investment trust, aimed for attracting investment to domestic property assets.

Still, Fitch noted the policies: "will take time to bear fruit, given the slow drafting of regulations and untested market."

JLL, an investment management firm focused on real estate services, shared the same sentiment with Fitch Ratings, noting that significant increase in the office room and condominium supplies this year will bring another challenge for the property sector.

"We are seeing a more active office market compared to the previous quarter, even as the new supplies have arrived and will arrive in a significant number this year," James Taylor, JLL head of research, said in a statement.

JLL estimated that rent prices for office space will fall 1.9 percent in the premium class and will keep falling in the next two to three years, but rent price for retail spaces will keep increasing in a "fair" manner.

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