Coronavirus threatens to derail Indonesia’s housing market recovery, with sales of flats down almost a third
- Sales of high-rise flats are likely to have dropped by 30 per cent in the first quarter, according to property consultancy Cushman & Wakefield
- The market had been recovering from a slump after political turmoil in the wake of last May’s disputed presidential election
The coronavirus outbreak is threatening the recovery of the Indonesian housing market, with sales of high-rise flats likely to fall 30 per cent in the first quarter, according to property consultancy Cushman & Wakefield.
The forecast came in the wake of Fitch Rating’s revision of its outlook for Southeast Asia’s largest economy’s homebuilding sector from stable to negative on April 1, citing “unprecedented weakening in domestic demand as the coronavirus pandemic engulfs the country.”
Another credit ratings agency, Moody’s, meanwhile, noted that the Indonesian rupiah’s slide against the US dollar to its weakest level since the 1998 Asian financial crisis had impaired the ability of the country’s developers to pay debts.
In the second half of 2019, Indonesia’s housing market was beginning to show signs of recovery – as transactions picked up after a period of political instability. Buyers were mostly end users, suggesting an improvement in fundamentals.
“The overall residential market is expected to soften in the first half of 2020,” said David Cheadle, managing director at Cushman & Wakefield Indonesia. “Several developers are already facing cash flow difficulties, with the Covid-19 outbreak disrupting developer revenues due to declining sales, with far fewer prospective-buyer inspections to housing projects caused by social distancing restrictions and work-from-home policies adding to the constant burden of construction loan interest rates of around 10 to 11 per cent of the loan value.”
The impact of the virus began to be felt in March, when sales of apartments were estimated to be lower by 25 to 30 per cent in the quarter than the average of 2,400 units in the final two quarters of 2019.
Sales of landed residential units, meanwhile, dropped 2 to 3 per cent in March from the previous month, according to Arief Rahardjo, director of research at Cushman in Indonesia.