Property Sector Outlook

Weak demand through end of year

After facing a shaky growth last year due to presidential election, during this year, property players is facing a number of challenges which are coming from changed in luxury property tax regulation, Rupiah depreciated, and slowing down on economy. Despite the noise from the property task has receded and government has relaxed the LTV ratio; demand for property is unlikely to recover. We saw that currently most of developers have been offering an attractive financial solution through company’s cash installment which allowed the down-payment to be installed. Moreover, pre-sales for this year is continue to slowing down especially for developers which segmented in middle-up bracket and focused on industrial estates.

Expecting an increase on property demand next year

Our economist expects the central bank would cut its interest rate in order to boost consumption by around 75 bps in the first half of 2016. We have positive view that it would lead the conventional banks to lower its mortgage loan by around 50 bps. Thus, we expect demand for property will likely to start recover in 2H16. Furthermore, to boost up lending growth, currently conventional banks are now seeking from consumer loans rather than a corporate loan. This had led conventional banks to cut its consumer loans rate, as well as mortgage loan by around 50 bps in 3Q15.

Gloomy outlook for office tower market and industrial estates

We are less sanguine for office tower space and industrial estates outlook in 2016 following to the unfavorable economic cycle that will reduce demand for its sectors. According to the research by Colliers, currently office space in Jakarta is facing a huge supply that in CBD area will see around 500,000 sqm of additional space per year up to 2019 and in outside CBD will see another additional supply of around 780,000 sqm up to 2017. Industrial estates player is also facing a challenging year ahead as we see demand remain weak due to lack of fresh catalyst.