Resicom – Holiday Investment – 04-21 – LB

Luxury Expatriate Housing Strong in Indonesia

The expatriate housing sector in Indonesia remains quiet in the third quarter in contrast to usual trends, however the demand for upscale housing remains strong.

Generally, expat leasing activities increase during summer months with a peak at the beginning of the new school term. However, this year volume was not as high as expected. It has been suggested that part of the reasoning behind this is the expiration of existing work contracts, the reduction in the number of arriving expatriates, and lack of new, ongoing building projects on a nation-wide scale.

While there remains a significant amount of Chinese expatriates in Indonesia, this does not impact the overall rental situation. This is because Chinese expatriates typically take the posting without their families and therefore opt for studio apartments or exclusive kost-kostan.

However, in contrast, demand for upscale property, and specifically those located in a housing complex and stand-alone houses remains strong. Enquiries are made largely by white-collar workers such as the country heads of a company, diplomats or chief executive directors from financial institutions. There are also many individuals who have a strong renting capacity.

The landlords who own such properties are usually part of the the high-net-worth-income (HNWI) society that do not care whether their property is vacant or not. This means that they are unlikely to lower rents.

There is a growing number of younger Asian expatriates accepting postings in Indonesia. The mainly originate from India, Singapore and China. These expats generally arrive with smaller budgets, ranging from USD1,000 to USD1,500 per month. This encourages activity for small individually owned apartment units. However, generally the remuneration package for Asian expatriates is relatively small in comparison to Western expatriates without schooling included for children. This can significantly influence the decision as to whether an entire family moves or just an individual.

In terms of location, Kebayoran Baru and Menteng are in high demand. Residential landlords and overseas property investors in these locations have therefore managed to raise rents significantly after reaching high occupancy levels. Those operating in these locations are also unlikely to lower rents as demand is not a pressing issue.

In contrast, properties in secondary areas, such as Lebak Bulus, Permata Hijau, and Ampera face challenges such as limited demand, lack of vicinity to international schools, clubs, shopping malls and dining spots. Many landlords in these locations are therefore willing to be flexible with regard to prices. They may also take requests such as those that relate to renovations, improvements and inclusive features of the house.

South Jakarta remains the most popular expat location in Indonesia, providing almost all needs that one might require, such as international schools and entertainment centres. Therefore remains a favourite for overseas property investors.

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