The government’s tougher mortgage policy and uncertainty on the direction the economy is moving may prompt property developers to hold off expansion next year, industry executives say.
Property developer Alam Sutera Realty has trimmed its capital expenditure next year to around 1.2 trillion to 1.5 trillion rupiah ( RM323 million to RM406 million) from around three trillion rupiah this year.
“We reduced our capex by 50 to 60 per cent because we’re not planning to make any big, corporate decisions next year,” said Hendra Kurniawan, Alam Sutera’s corporate secretary, in Serpong, Banten, last Monday.
Hendra said the cut was a cautionary move as the election year is coming.
An executive at a property consultancy firm had a different view.
Arief Rahardjo, head of research at property consultancy Cushman & Wakefield, told the Jakarta Globe that the elections in 2009 and 2004 had a “temporary and insubstantial” impact on the property market.
However, high interest rates and slowing economic growth may slow the property sector next year.
“We will see increasing ‘wait-and-see’ attitude from some property developers, investors and house buyers,” Arief said.
The central bank has set a 40 per cent minimum down payment for bank loans used to buy second homes and 50 per cent for a third home.
The regulation follows the 30 per cent minimum down payment regulation set last year that had little impact on a market that has been growing steadily in the last few years.
Arief said demand growth is projected at 3.7 per cent, some two percentage points lower than this year.
“These issues are expected to hold back the significant land price growth of above 25 per cent year-on-year, which has been seen over the four years. For 2014, residential land prices are forecast to grow more modestly by around 18 per cent,” he said.
Bank Indonesia is also restricting mortgage distribution to houses that are still in the early stages of construction. This means developers must seek other sources of financing as previously customers could get the bulk of financing for buying units from banks, even though the construction of the unit has not been completed.
“It will be a tougher year for developers and will impact supply growth,” Arief said, adding the supply of houses in 2014 was projected to rise at a slower rate of three per cent to 327,404 units.
