INDONESIA PROPERTY MARKET OUTLOOK Jakarta, Indonesia October 29-31, 2015
PRESENTATION AGENDA MACRO ECONOMIC INDICATORS GDP Annual Growth Rate Unemployment Rate Inflation Rate JCI Index / Exchange Rate PROPERTY MARKET SNAPSHOT Passage Of Time Expatriate Journal Primary Market Transaction Costs Property Stimulus MAJOR INSTRUCTIONS Assignment EXCLUSIVE Closed Deal Last Six Month
MACRO ECONOMIC INDICATORS
INDONESIAN POLITICS
MACRO ECONOMIC MAJOR TAX POLICY NATIONAL TAX AMNESTY The elimination of tax liability, its penalty and its criminal charges for Indonesian citizens who declare past unreported income / asset into their tax file report within a certain period of time by paying certain percentage of ransom money to the government. Time of reporting Ransom money October 2015 - December 2015 3% January 2016 - June 2016 5% July 2016 - December 2016 8%
MACRO ECONOMIC MAJOR TAX POLICY ASSET REVALUATION Special tax incentive for companies that revalue their assets and report it in their balance sheet. The previous rate was 10% Time of reporting Ransom money October 2015 - December 2015 3% January 2016 - June 2016 4% July 2016 - December 2016 6%
MACRO ECONOMIC INDICATORS INDONESIA GDP ANNUAL GROWTH RATE
MACRO ECONOMIC INDICATORS INDONESIA UNEMPLOYMENT RATE
MACRO ECONOMIC INDICATORS INDONESIA INFLATION RATE
MACRO ECONOMIC INDICATORS INDONESIA STOCK MARKET
MACRO ECONOMIC INDICATORS USD to IDR Exchange Rate
MACRO ECONOMIC INDICATORS
PROPERTY MARKET SNAPSHOT
PROPERTY MARKET SNAPSHOT PASSAGE OF TIME
2009-2013 Major Catalyst EXTERNAL 1. Post Lehman s crisis (2009-2013), the US Government : - Quantitative easing (printing new bill) - Zero interest rate (prompting US investment abroad) - The weakening of USD (the strengthening of IDR up to 8,500-9,000) 2. Major trading partner (China) experiencing unprecedented a double digit GDP growth (10.4%) in 2010 and 9.3% in 2011 3. Post Japan s quake, major Japanese Industrial players moved their manufacturing facilities to Indonesia, most notably, Toyota s investment of 200 Ha in Karawang to establish Indonesia as its major production and export hub INTERNAL 1. Despite some turmoil, SBY presidency (2004-2014) has now been acknowledged to have provided a 10- year political stability. 2. Rising commodity (mining & plantation) prices which in turn fueled increasingly high export volume for the country. 3. BI benchmark rate was lowered to reach 6.25% in 2012 Consequently, Indonesian GDP growth reached above 6% for 3 consecutive years (2010-2012) and the significant rise of new Middle Class.
Consequently, Indonesian GDP growth reached above 6% for 3 consecutive years (2010-2012) and the significant rise of new Middle Class. PROPERTY BOOM Owner of big mining and agricultural companies deriving windfall profit poured their money into the real estate market of all types in Jakarta, i.e Deutsche Bank building in Diponegoro, Menara Prima in Mega Kuningan and Menara Palma in Rasuna Said to name just a few. In 2013, Jakarta residential real estate market was voted as the second best in the world in terms of capital appreciation. Property Investors enjoyed a gigantic capital gain between 50-100% per year between 2011-2013. All second and third tier cities across Indonesia experienced property boom likewise Due to all the major FDI in manufacturing, the industrial land especially along the Cikarang - Karawang belt, that had been sleeping for 10 years, got a sudden lift and received its due rise in 3-4 folds. Finally, due to the lucrative property business, many cash-rich non-property players from Manufacturing, Telco, Energy, Oil & Gas, to Plantation companies jumped into the bandwagon to become developers so to create unprecedented number of High Rise constructions that Jakarta never seen before.
PROPERTY MARKET SNAPSHOT 2014-2015 WHAT IS HAPPENING NOW? The US already reduced the quantitative easing and planning to increase rate The USD strengthening and IDR once reached the lowest at 14,800/ USD China experiencing slower GDP growth reaching below 7% in Q3 2015 The commodity prices are at all time low BI rate still high at 7.5 Slower GDP growth at 4.7% in Q1 2015 The start of oversupply condition and the weakening of purchasing power
PROPERTY MARKET OFFICE MARKET 1. SUPPLY Toward the end of year 2015, there will be 430.000 sqm new supply in Jakarta and predicted to keep on increasing until 2 million sqm new supply by year 2018. This number will add to the existing office space of 5,2 million sqm. 2. DEMAND a.) The economic slow down has naturally reduced the office space demand. b.) Many companies decide to wait and see and start cutting the operation cost, including office space (as the second largest company expense cost after salary).
PROPERTY MARKET OFFICE MARKET 3. OCCUPANCY On the second Q 2015, the occupancy rate decreased YoY from 95,6% to 93,7% for CBD area and from 93,2% to 91,7% for non CBD area 4. RENTAL RATE a.) Starting July 2015, Government implement policy that all property rental and purchase shall be denominated in Rupiah. b.) The average rental rate now is Rp. 300.000/sqm/month + service charge.
PROPERTY MARKET OFFICE MARKET 5. TREND The massive new supply + secondary market (from strata title) and continous economy slow down impact to the reduction of office space demand which will bring about significant correction in office rent and sale price. It is happening that many developers and building owner have dropped the negotiated rate from its open or publish rate and offer more incentive to the terms and conditions, such as longer grace period etc. The oversupply of office space in Jakarta market will continue to haunt the market till at least the end of 2017.
PROPERTY MARKET RESIDENTIAL MARKET Due to the weaker purchasing power and tax regulation uncertainty, many developers didn t launch any new project in the first 6 months of 2015. Many MNCs cut their foreign workers with families because it has become too expensive to maintain them in the economy downturn Expatriate Rental market especially for big unit residence is also down. People opt to buy residential properties in the secondary market because the transaction cost is much lower. In the future, developers will build, market and sell only smaller unit apartments (below 150 sqm) to avoid luxury tax (20%).
PROPERTY MARKET INDUSTRIAL MARKET The Industrial land price is down about 30-35% from its peak due to the slowdown of the economy. The minimum wage rise in Jakarta and greater Jakarta have also affected the company s operation cost. Government has issued new economic package to give 10 year tax holiday to companies that open new business in the Industrial Estates outside Java Island. The government has issued a new formula bywhich wage increase is calculated and that has spurred the worker union s anger and prompted them to bring the matter into the street (big demonstration)
PROPERTY MARKET SNAPSHOT EXPATRIATE JOURNAL
PROPERTY MARKET SNAPSHOT Seller s Tax 5% Buyer s Tax 5% VAT 10% Transaction > IDR 5 B 5% (PPh 22) Transaction > IDR 10 B 20% (Luxury TAX) TOTAL 25% 45%
PROPERTY MARKET SNAPSHOT MAJOR POLICIES & INFRASTRUCTURE PROJECTS THAT WILL STIMULATE THE FUTURE PROPERTY MARKET IN JAKARTA AND GREATER JAKARTA
PROPERTY MARKET SNAPSHOT
PROPERTY MARKET SNAPSHOT JAKARTA MRT ROUTE in 2020
PROPERTY MARKET SNAPSHOT JAKARTA LRT MAP
PROPERTY MARKET SNAPSHOT SOEKARNO HATTA - AIRPORT TRAIN LINE
PROPERTY MARKET SNAPSHOT GRAND DESIGN SOEKARNO HATTA AIRPORT
PROPERTY MARKET SNAPSHOT EXTERIOR DESIGN SOEKARNO HATTA AIRPORT
PROPERTY MARKET SNAPSHOT INTERIOR DESIGN SOEKARNO HATTA AIRPORT