Indonesia’s property market is once again soaring 15 years after a regional financial crisis sent its economy downhill.
The capital Jakarta is one of Asia’s hottest property markets, with asking prices for some condominiums in central Jakarta surging 12% since the second half of 2011, according to data from estate agent Knight Frank.
Meanwhile, Jakarta’s office market is one of the region’s tightest. According to a Jones Lang LaSalle report, grade A buildings in the Indonesian capital post occupancy levels of 98.1%, compared to Singapore’s 92% and Kuala Lumpur’s 85%.
To take advantage of the country’s newfound boom, property developers are unveiling ambitious projects in Jakarta. One example is the 111-storey Signature Tower by PT Grahamas Adisentosa, a subsidiary of Artha Graha group. The US$2 billion proposed tower will be the world’s fifth tallest if completed, and is set to include a 300-room ‘six-star’ luxury hotel, grade A offices and conference facilities.
The Signature Tower follows high-end projects from other developers, such as PT Ciputra TBK’s Ciputra World and Lippo Group’s St. Moritz.
Other areas, too, are feeling the pulse. Property analysts say that the land prices in Seminyak, one of the Bali’s most popular tourist areas, have jumped 50% during the past year. Meanwhile, some developers are looking further afield. PT Lippo Karawaci is late September announced that it was building 13 shopping malls, including in Bali, Medan and Surabaya.
This flurry of activity is in stark contrast with what was happening during the 1997–1998 Asian financial crisis when many people moved out of Jakarta and construction came to a standstill.
However, a number of analysts expect a repeat of those episodes, and that the pace of residential price gains and rent increases could slow, especially if Chinese demand for Indonesia’s main commodity exports does not pick up soon.
But for now, developers are planning to charge ahead with plans to add hundreds of thousands of square meters of new office space, homes and shopping malls in the next half-decade.
A number of foreign companies are also expanding their operations in Indonesia, despite economic uncertainties elsewhere. Google recently opened an office in Jakarta, while low-cost carrier AirAsia recently moved its regional headquarters to Jakarta from Kuala Lumpur.