Indonesian residential developers find new creative ways to promote projects 

Some have been using online channels like Instagram and TikTok. 

In Q3 2021, Jakarta saw 2,107 units from four apartment projects being completed, bringing the total number of apartment units to 217,085.

According to Colliers, another 940 units will be available during Q4 2021, thus the total annual supply of new apartments will be 3,383 units, which is 15.7% lower than our expectations in 2020, meaning that there are still some more project delays, despite not as many as in the previous year.

“As the pandemic and Covid-19 cases subside and the public activity restrictions (PPKM) in Jakarta were downgraded to level 3, we believe developers will review the revival of unfinished projects. We predict there will be more projects completed going forward.”

Here’s more from Colliers: 

The absorption rate continues to remain flat at 87.29% (+0.09% QOQ or -0.41% YOY). However, we have witnessed some improvements in quarterly sales. Almost 200 units have been sold during Q3, slightly higher than the sales in the previous quarter. Growth in sales was largely due to the management of the pandemic which provided increased optimism amongst potential buyers.

During the PPKM, quite a few developers were trying to promote their projects via both offline and online channels in more creative ways. Social media, especially Instagram and TikTok, were used extensively to show their show units online. For instance, there is a TikTok challenge for a project located in Tangerang, to select the best video of the show unit. Instagram Live and Zoom have also been widely used to broadcast webinars. Offline, a luxury project utilised its marketing gallery for a fashion exhibition to extend the function of the show unit. 

Based on our observations, such strategies are quite effective in raising awareness among potential customers. According to sales persons, only around 10-20% of their customers have dealt fully via online and all of them are customers who either live outside of the Jabodetabek area or live abroad. Those, particularly living in the Jabodetabek area, would prefer visiting the marketing gallery or show unit by appointment despite the pandemic. This means the existence of the marketing gallery and show units are still important because customers prefer to “feel the real unit” and do the transaction via an offline channel. 

We are quite optimistic in envisaging a sales recovery in Q4 along with the improving situation and developers have a chance to open their marketing galleries and show units. Nevertheless, sales growth is projected to grow modestly, not as significant as in previous years. The take-up rate will remain at 87-88% by the end of 2021.

Does price stagnation boost sales growth?

The asking price across regions has yet to increase over three consecutive quarters, remaining stagnant at IDR 35 million/sq m (0.00% QOQ or +0.13% YOY). Developers are still being pressured by the VAT incentive programme which was extended until the end of 2021, particularly for projects under construction which have to compete with ready-stock units. These existing units tend to maintain their price and they benefit from VAT relaxation, which applies further pressure to projects under construction in fine tuning their prices.

As previously discussed, sales volume has been growing modestly this quarter, yet we have seen that this has only happened on certain projects. There are four common factors associated with good absorption: The first is for projects that have introduced new towers but are offering a lower asking price than for previous towers. Second, in most cases this has happened in projects with unit prices below IDR 2 billion. Third, the newly completed projects that are recently available benefit from the VAT incentive programme. And lastly, this applies only to projects developed by well-known developers or those located within a big complex or mature/established locations. 

We assume that asking prices will remain the same until the end of this year. In the longer term, prices will grow modestly, following the inflation rate.