The idea of luxury property may seem incongruous in the context of Jakarta, yet, according to Knight Frank, the Indonesian capital has the fastest-growing prime real estate in the world.
For two years in a row, Jakarta has topped Knight Frank's Prime Global Cities Index of luxury real estate markets in 30 cities, with top-end homes gaining 37.7 per cent in 2013, and 38 per cent in 2012. But, while the prestige factor usually underpins the growth of blue-chip property, in Jakarta's case, it is more likely a desire to escape the alternative.
In a notoriously polluted city where traffic jams have been called "inhumane", avoiding them by living close to work is the ultimate prize. There is limited supply of high-end property in the downtown/central business district (CBD), and few prospects, due to scarcity of land. Thus, says Hasan Pamudji, associate director of Knight Frank's research team, Jakarta is "one of the emerging property markets, despite its shortfalls".
Most buyers are wealthy Indonesians, whose coffers have been boosted by booming mining and commodity sectors, along with a few expatriates and top officials. Indonesia still does not allow foreign individual property ownership. For the rich - a sector forecast to more than double in the next decade - a luxury CBD condominium is just a second home. "Traffic jams create a strong demand to live closer to the workplaces," Pamudji says.
Property markets across Indonesia were expected to slow down this year, given the legislative election in April, and presidential election in July. Yet, Cushman & Wakefield data shows little evidence of that. Good sales were reported in existing and proposed condominium markets in the first quarter of this year, a period which saw 25 new launches. "The condominium price trend continued to increase, along with the growth of the land price," Cushman & Wakefield reports. The average price of 34.7 million rupiah (HK$22,781) per square metre for a CBD condominium represents a 33 per cent increase year-on-year, while average price growth in the prime sector was 24.3 per cent.
JLL's latest report shows that new launches in the first quarter were the highest in two years. With the addition of newly-completed projects - including Pakubuwono Terrace (North Tower) in South Jakarta; along with GP Residence in West Jakarta, and two towers (Presidential Suites and Ambassador Suites) in St Moritz mixed-use development - total stock of existing condominiums in Jakarta rose to approximately 91,330 units - 29 per cent of total inventory being in the CBD, and 21 per cent each in the secondary area of north and west Jakarta.
Luke Rowe, head of JLL's residential business in Jakarta, puts the "excellent" sales result down to a feeling of optimism.
"While the world worries about tapering, emerging market contagion and Indonesia's current account deficit, the Indonesian domestic consumer continues to be in an ebullient mood," he says. According to a recent Nielsen survey, consumer confidence was back to a four-year high in the fourth quarter of last year, with Indonesia scoring the highest out of 60 countries surveyed. Rather than cooling the market, anticipation of the upcoming elections seemed to have the opposite effect, with few expecting little, if any, disruption to jobs and incomes.
As a 17-year resident, Rowe can also see past the "choking traffic, the seemingly never-ending rain, chronic flooding, poor city planning, insufficient infrastructure, haphazard property development, and the overbuilding in certain sectors". Jakarta, he says, remains a supercity on the world stage. "The economic transformation and the facelift-style gentrification of the inner city is occurring before our eyes. We cannot ignore the overwhelming trends. Indonesian society has slowly but surely come to terms with the new paradigms associated with inner-city living. Mass rapid transit, an inner-city monorail, traffic alleviation measures and major infrastructure spending have become urgent and must-have elements."
Twenty years ago, Rowe says, apartment living was almost unthinkable for the middle to upper class. Now it has become a trend. Investment in inner-city apartments has generated wealth and provided lifestyle alternatives. "People try to design their lifestyle around Jakarta's inadequacies," he says. "We are all looking for the same thing: being able to find the work-life balance - putting our family first while being able to navigate the city and to be able to conduct our everyday lives with minimum disruption."
Seventy-four per cent of all new projects in Jakarta are sold off-plan before significant construction has taken place, Rowe says. By the time of practical completion, sales rates average 90 per cent sold. "That is more than a healthy market," he says. "It is a bullish market. In other countries it is more normal to see 30 per cent of sales off- plan; 50 per cent sales at the time of topping off the apartment structure; and the project being 70 per cent sold at the time of completion and unit handover."
In the middle to upper segment, he adds, there is a "surprisingly low number" of mortgages attached to unit purchases. "Most buyers elect to make progressive instalment payments throughout the course of construction. Not surprisingly, many foreign property developers are actively seeking opportunities to participate in this market."