Jakarta’s condominiums are grappling with significant challenges as supply continues to outstrip demand. In the first quarter of 2024, the supply of condominiums in the city reached a staggering 259,000 units. However, the demand for these units has been notably weak, leading to a large unsold inventory of 44,870 units.
A recent report by Leads Property, as cited by CNBC Indonesia on Wednesday (10/7/24), highlights the core issues. “The weak demand across all segments is primarily due to high competition in the landed housing sector in Bodetabek (Bogor, Depok, Tangerang, Bekasi),” the report states.
Despite the government’s implementation of a VAT subsidy, this measure has not been sufficient to stimulate interest in condominiums. “Even though there is a VAT subsidy, it hasn’t been able to boost interest in condominiums. Developers tend to hold back from launching new projects as a precaution,” the report elaborates.
The high level of unsold inventory is evident, with only 106 units being absorbed in the market. “There was an addition of 192 condominium units from Belton Residence. Prices remain relatively stable from the previous quarter as it is too risky to increase prices. Developers are cautious in launching new projects,” Leads Property notes.
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The price of condominiums in Jakarta is also a factor, with an average price of IDR 27.3 million per square meter. Prices vary significantly based on location, with the Central Business District (CBD) commanding prices of IDR 56.3 million/m2 and the Outer CBD (OCBD) at IDR 25.7 million/m2.
Breaking it down by segment, the prices are as follows: lower-middle segment at IDR 17.4 million/m2, middle segment at IDR 24.5 million/m2, upper-middle segment at IDR 33.4 million/m2, upper segment at IDR 46.9 million/m2, and luxury segment at IDR 67.9 million/m2. “As a result, buyers tend to prefer landed houses in Bodetabek over condominiums in Jakarta,” the report asserts.
To avoid Luxury Goods Sales Tax (PPnBM), luxury condominium prices are often capped at a maximum of IDR 30 billion. “The current trend is that new project launches are being held back due to oversupply conditions and declining demand, while competition between primary or ready-stock units and secondary units has a significant price difference, reaching 30%,” the report explains.
In response to these challenges, developers are shifting their strategies. They are now focusing on targeting end-users rather than investors, particularly in the upper-middle and luxury classes. This shift emphasizes lifestyle and security aspects and often involves branding associated with five-star hotels or high-end residences.
“Flexible payment options, marketing gimmicks, and VAT subsidies are expected to act as catalysts for demand, especially for ready-stock units priced below IDR 2 billion per unit,” the report concludes.
Jakarta’s condominiums are facing a critical juncture, and the strategies adopted by developers in response to current market conditions will be key to navigating this challenging landscape.
