Jakarta’s strata-title apartment sector has yet to recover despite government intervention

Only 575 units were sold until the first semester of 2021. 

According to Colliers, more strata-title apartment units can be completed this year but are still limited due to the rise in COVID-19 cases. One project, namely Kebayoran Apartment (Ruby Tower) with 336 units, has been completed in this quarter. Currently, the total existing units has reached 215,627 units. We predict there will be more completed units in the third and fourth quarters of this year, as the government has extended the VAT exemption on existing ready-to-use projects with price below IDR5 billion until December 2021. 

Additionally, there is one project being introduced in this quarter, i.e. Terrace Diamond Tower at Mega Kuningan with 268 units in total.

Here’s more from Colliers:

Although we predict there will be more units that can be completed this year, we are still predicting there will be some delays on many projects. As COVID-19 cases have been rising again, especially in Jakarta, the government has started to rule out stricter PPKM Darurat (emergency public activity restrictions) rules. Also, this obstructs market recovery. We see this as a temporary setback and remain positive in the long-term outlook with visible large underlying housing demand from the rise of the young middle-class population together with improvement of global economic recovery. We believe this will support sales in the medium to long term.

The absorption rate has remained flat at 87.2% (+0.1% QOQ or -0.5% YOY) which suggests that the market has not recovered yet even though the government has provided some relaxation programmes. In general, only 575 units were sold until the first semester of 2021. Most sales in this quarter were from completed units, but the number remains insignificant for the overall market.

Regarding promotions, developers tend to extend their programmes from last year as they have found this more effective to boost sales, especially on under construction projects. For completed projects, besides utilising the relaxation VAT programme, they give additional discounts and gimmicks for customers too. However, as stated before, we have not seen any exceptional sales recovery during this pandemic. Also, this is proven by the credit channelling to strata-title apartment growth remaining much lower than to landed housing.

Luckily, the government has extended the VAT relaxation programme until December 2021. This gives more time for developers to boost their sales of (newly) completed projects. However, we predict the sales growth of strata-title apartments will remain sluggish since people are still in the mindset of “wait-and-see” until the pandemic ends. 

No raising of prices in this quarter 

None of projects raised their asking price in this quarter; this is the first time this has occurred. Thus, the asking price remains at IDR35 million (+0.0% QOQ or +0.16% YOY). Many factors affect this; from the weaker sales performance to pressure from the VAT incentive programme that makes them unable to increase their asking price. In addition, tough competition from secondary properties also affects stagnation of prices. Those who sell apartments now are most likely under compulsion and hence any softness in prices is due to the dominating share of such sellers.

Further, since the government has extended the VAT relaxation programme until December 2021, we assume developers will continue to have difficulty in raising their asking price. Therefore, we predict the asking price will remain stagnant at least until next quarter. 

In the longer term, if the vaccination programme is a success and the global economy improves, the apartment price in Jakarta should get back on track to the economic trend line growth of 4-5% pa. This medium- to long-term forecast should hold if there are no returning waves of infections globally or serious political fallout in Indonesia.