The Purchasing Power of Apartments in Urban Areas Is Still Weakening, What’s the Cause?

apartment (illustration)

Demand for and purchasing power for apartments, particularly in urban areas, is still showing a weakening trend. It is also assessed that the prospects for strata apartment absorption will still weaken in 2023. Then, what exactly is the cause of this weakening?

Several factors such as oversupply, lack of incentives, and negative perspectives on vertical housing have made the apartment market less attractive to urban communities. This was revealed by Knight Frank Indonesia’s Senior Research Advisor, Syarifah Syaukat, quoted on Tuesday (21/2).

According to her, it is predicted that the strata apartment market will still have difficulty growing. This difficulty is due to consumer purchasing power of apartments which has not improved. On the other hand, the stock of apartments is abundant.

Furthermore, Syarifah sees the condition of the many stalled apartment projects currently triggering consumer confidence in high-rise buildings. For this reason, information transparency related to project development progress needs to be informed periodically, starting from information on groundbreaking to topping off.

Currently, She explained that in Jakarta there are around 60 new apartment projects currently under construction. Meanwhile, according to him, the number of stalled projects is far less than the projects that are actively building.

Meanwhile, for the rental apartment market, Knight Frank sees recovery with indications of occupancy starting to move positively at the end of 2022. This is triggered, among other things, by the re-entry of Foreign Citizen workers (WNA) and the return of corporate tenants to rental apartment spaces.

Based on Knight Frank’s records, the total demand for apartments in 2022 is starting to improve, although it hasn’t recovered yet. He compared demand during the pandemic, namely in 2020-2021, only reaching 5,000 units.

Meanwhile, during the pre-pandemic period in 2022, the general level of demand would reach 15,000 units annually. In general, the performance of the apartment sector in 2022 is moving slowly.

Syarifah’s opinion was agreed upon by the Executive Director of the Center for Indonesian Property Studies, Panangian Simanungkalit.

He said the lack of consumer interest in apartments was also a failure of the government which was unable to socialize the benefits of living in vertical housing.

According to him, Hong Kong, Manila, Malaysia, and Singapore have succeeded in marketing apartments to their citizens because there is a role for the government in working with developers to provide incentives for those who are interested in living in apartments, especially for the middle class.

“In Jakarta, there is no government program to get people interested in living in apartments. This means that this government has not succeeded in building people’s interest in living in apartments,” he said.