When the interests of housing loans program (KPR) and the incentives from developers (down payment credits) are included in investment calculations, buying an apartment in Kuningan area seems to be interesting enough. But, with 30% down payment and current interest rate, buying an apartment can be 4% more expensive than renting the same property. Whereas in last two years, buying an apartment in Kuningan is 26% cheaper than renting the same apartment.
Long-Term or Short-Term
The potential property market which becomes potential to get overvalued is the result of two main causes, i.e. first, the condition and situation of the country that relatively stable, either in macro or micro economics wise. Secondly, the sustainable national economisc growth has attracted a lot of foreign investors to invest in Indonesia. By the time, it will lead the expatriates to come, and it stimulates the growth of residences demands.
All of those matters are driven by the middle class economics growth. Even though the apartment market situation in Kuningan area is at risk of overheating, but there are some investors who keep 'jumping in' to the running fast train wagon. They are expecting that it will not be too late to get great cuan* from the property investment, like those who have been there.
There are significant issues that shall be observed, of course. The policy to buy versus to rent is really depending on anyone's financial condition (which is different for everyone), and also their plans and preferences.
Each area has its own dynamics for property for sale and for rent. The houses in Kepala Gading, for example. The investors there are seldom to calculate the profits from the renting, but prefer to focus on the profits from reselling (capital gain) of their property investment. As the result, the formula of basic price around 5% for property value is not applicable in this case.
The property buyers in areas of potential jumping-high-price are neither stay being quiet, since the ratio of buying price is not as high as renting price like before. Nevertheless, they know that such an investment game is just leaving them with little-space of potential miscalculation.
This is different than the agreement of some economics experts about the capital market value: away from bubble, of course, but it is expensive enough to drive the investors to stay alert. Although the house price seems to be sustainably high for some times forward, the investors have potential risks that are quite fragile upon their investment value which comparative to other kind of investment.
The renters might be able to avoid this risk, despite loosing their opportunity of potential profit and growth of property price in areas like Serpong, Bekasi and Cibubur.
"If you thought that properties values in Menteng, Kebayoran Baru and Pondok Indah have been too high and correction would be to happen; it actually leads the situation of housing rental getting more profitable," said Rendra Lembong from Lembong House, a company that since 1970's has been specialized in housing services for expats. Rendra also said that current house renting price is adjustable enough with the growth of property price, in despite of admitting that high property price has made the property buyers gaining enough exposure on risks of pseudo price (demand price is high but no buyers).
The property market in Kuningan area, where Johan and Jenny Wijaya have sold their apartment and gotten high capital gain, already showed such a power which leading toward new booming market. Besides the expatriates community that remain growing in Golden Triangle area, pseudo demand for apartment in this area is far beyond the real supply. This area is filled with thousand of new apartment units, whilst there are many of old apartments - developed in almost last 2 decades - which are not occupied.
This combination has been adequate to impact the average prices per sqm for properties in area with postal codes of 129xx and 121xx which leaping high to be around 200% since the last of year 2011, based on data that analyzed from rumah123.com. In the meantime, the average renting price is only 23% getting higher around the same periods.
"When we bought an apartment four years ago before the market was leaping, the market condition at that time was still stagnant, and it seems that people have learned from their experiences," said Johan "Unexpectedly, the price is getting high rapidly."
All of those matters are driven by the middle class economics growth. Even though the apartment market situation in Kuningan area is at risk of overheating, but there are some investors who keep 'jumping in' to the running fast train wagon. They are expecting that it will not be too late to get great cuan* from the property investment, like those who have been there.
There are significant issues that shall be observed, of course. The policy to buy versus to rent is really depending on anyone's financial condition (which is different for everyone), and also their plans and preferences.
Each area has its own dynamics for property for sale and for rent. The houses in Kepala Gading, for example. The investors there are seldom to calculate the profits from the renting, but prefer to focus on the profits from reselling (capital gain) of their property investment. As the result, the formula of basic price around 5% for property value is not applicable in this case.
The property buyers in areas of potential jumping-high-price are neither stay being quiet, since the ratio of buying price is not as high as renting price like before. Nevertheless, they know that such an investment game is just leaving them with little-space of potential miscalculation.
This is different than the agreement of some economics experts about the capital market value: away from bubble, of course, but it is expensive enough to drive the investors to stay alert. Although the house price seems to be sustainably high for some times forward, the investors have potential risks that are quite fragile upon their investment value which comparative to other kind of investment.
The renters might be able to avoid this risk, despite loosing their opportunity of potential profit and growth of property price in areas like Serpong, Bekasi and Cibubur.
"If you thought that properties values in Menteng, Kebayoran Baru and Pondok Indah have been too high and correction would be to happen; it actually leads the situation of housing rental getting more profitable," said Rendra Lembong from Lembong House, a company that since 1970's has been specialized in housing services for expats. Rendra also said that current house renting price is adjustable enough with the growth of property price, in despite of admitting that high property price has made the property buyers gaining enough exposure on risks of pseudo price (demand price is high but no buyers).
The property market in Kuningan area, where Johan and Jenny Wijaya have sold their apartment and gotten high capital gain, already showed such a power which leading toward new booming market. Besides the expatriates community that remain growing in Golden Triangle area, pseudo demand for apartment in this area is far beyond the real supply. This area is filled with thousand of new apartment units, whilst there are many of old apartments - developed in almost last 2 decades - which are not occupied.
This combination has been adequate to impact the average prices per sqm for properties in area with postal codes of 129xx and 121xx which leaping high to be around 200% since the last of year 2011, based on data that analyzed from rumah123.com. In the meantime, the average renting price is only 23% getting higher around the same periods.
"When we bought an apartment four years ago before the market was leaping, the market condition at that time was still stagnant, and it seems that people have learned from their experiences," said Johan "Unexpectedly, the price is getting high rapidly."
*) cuan: Chinese term which refer to 'profit'.
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Author: +Leo Ferdinand Rahadian | Premium House
Printed version published by: Property-in Magazine Edition 01 | January 2015
Photo illustration courtesy of World Property Journal
+Leo Ferdinand Rahadian has
gained 15 years of experiences in the field of real estate agent. He is
in charge of Managing Director of Premium House, a real estate company
focusing on premium house and apartment units for expatriates in
Jakarta. Email: leo@mediapura.com
