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Jakarta office market: time to invest

Oversupply in the Indonesian capital will not continue

[caption id="attachment_56796" align="alignright" width="740"]Jakarta, Indonesia. Andreas Hie/Shutterstock Jakarta, Indonesia. Andreas Hie/Shutterstock[/caption]

By Mina Ondang

The imbalance between new supply and demand growths in the last two years has caused the office occupancy rate in Jakarta’s central business district to drop to 82 percent in Q2 2016 from 94 percent in 2014.

A total of more than 2 million square metres in office space is currently under construction and expected to be completed in the next 3 to 6 years, if developments go on schedule despite the weak market condition.

Oversupply in the CBD office segment may not last forever. One of the reasons is that a high development cost may not justify the feasibility of a new office project. For example, despite the MRT project providing incentives to the land owner within the Transport Oriented Development, the cost of increasing plot ratio virtually remains equivalent to buying new land in the same location to build the same office.

Rental is bottoming out

Our research forecasts CBD office occupancy will bottom out at slightly below 80 percent. We have seen projects sized more than a million sqm at design stage being postponed indefinitely as developers wait for the occupancy, rental rate, and sale price reach levels that justify the development cost.

The high cost of increasing plot ratio becomes a natural stop gate for an oversupply of office properties in the future.

A period of decline in asking rental prices has just passed, especially with landlords of newly completed buildings being more cautious and more willing to negotiate to meet tenants’ budget. We are starting to see that rental rate is bottoming out.

Time to invest

The market indicated that asking prices in the CBD office sector have stopped increasing in the last few quarters, while transacted prices have become more reasonable and shown a market correction. After the first phase of tax amnesty, investors are more actively searching for suitable property that will serve their diversification purposes.

As rental rates stop falling and investors become more active, capital values will start to increase. There are many strata-title office building options for either owner-occupiers or investors, but less than a handful en-bloc office buildings for sale especially within the CBD. This is a critical time to find the right property to invest.

About the author:
A senior member of Cushman & Wakefield Indonesia’s Investment team, Mina Ondang serves high net worth individuals across the archipelago and abroad. Among other accomplishments, she was instrumental in successful sales of Office 8 and Multivision Tower in Jakarta. She also successfully represented Redplanet Hotels in acquiring hotel sites across the country. Ondang is a central panel judge of the Indonesia Property Awards and moderated the panel discussion “How the MRT could transform Jakarta real estate” at the first Property Report Congress Indonesia held on 13 October 2016 at Fairmont Jakarta.


Why you should (and shouldn’t) want a car-free or driver-less city

Car-less cities are not just the stuff of sci-fi utopia

[caption id="attachment_51890" align="aligncenter" width="740"]Pedestrian area in Brussels (Photo by Miguel Discart/Flickr) Pedestrian area in Brussels (Photo by Miguel Discart/Flickr)[/caption]

By Al Gerard de la Cruz


For several years now in Jakarta – beset by what some view as the "worst traffic in the world" – residents look forward to car-free Sundays along the big boulevards of Jalan Sudirman and Jalan Thamrin.

Now it looks like Paris is following suit. The iconic Champs-Elysees went car-less early last month, a move met with enthusiastic response from thousands.

Other cities are doing away with drivers altogether. Later this year, Singapore will be rolling out unmanned public mini-buses – seemingly straight out of futuristic movies – to ferry commuters around key train stops. Baidu founder Robin Li is also envisioning an entire metropolis with cars sans drivers in Wuhu, China.

These concepts are making an important statement for the next industrial revolution and against climate change. Change will not be forthcoming though.

More: Will the next successful smart city be in Southeast Asia?


When a city goes car-free, the public transit will emerge as the logical alternative, aside from walking outright. Southeast Asia has not been exactly at the cutting edge of public transport, however. Jones Lang LaSalle has highlighted the lack of mass rail transit in Southeast Asian cities besides Singapore.

Critics point out that car-free programmes are susceptible to exploitation by commercial brands. Along with the pedestrians, Indonesian companies have taken to Jakarta’s streets on car-less days to install booths and set up stages for marketing activities, reports The Jakarta Post.

A driverless city takes immense infrastructure investment, anywhere from convoluted intersections to lane markings. On a road with ambiguous markings, a self-driven vehicle could stay put and set itself up for an accident. It may also do the complete opposite, barreling through an intersection where a stoplight has been damaged.

More: New tech will allow people to bypass current constraints


Nothing replaces a human touch when it comes to manning vehicles, but automotive advancements are brimming with possibilities to eliminate the idea of a driver. In 2016, we’ve seen a concept car that can park by itself in a very narrow space.

Speaking of which, car-free days should result in more land for public spaces and residential real estate. To that end, the Singaporean government has levied high taxes on car ownership, making purchases here a true luxury. With its small land area and fast-growing populace, the city-state needs all the real estate it can get over transport infrastructure.

Last but not the least, the benefits of going car-free in the greater context of an ailing biosphere could not be emphasised enough. According to Greenpeace, transport contributes approximately 13 percent of global greenhouse gas emissions. Two-thirds of these can be traced to road transport.

More: Guess which Asian city is most appealing for infrastructure development

Middle of the road

There’s a middle-of-the-road approach to shrinking the world’s carbon footprint, however. Many people are realising that the next greenest alternative to not owning a car is getting an electric one, an idea that has been steadily growing in vogue. The International Energy Agency counted 1.26 million electric cars on the road worldwide in 2015.

Google has been offering a glimpse of their line of unmanned electric vehicles, currently under development. It all looks like a big honk for the environment so far.

What do you think? Sound off in the Comments section below.


Are properties near Singapore's popular schools more expensive?

Parents are paying top dollar to move into homes closer to the schools for their children. But are these properties really worth more?

[caption id="attachment_51655" align="aligncenter" width="740"]Image credit: Regality Singapore Image credit: Regality Singapore[/caption]

Every parent wants to do whatever is within their power to give their children a head start in life. Singaporean parents however, are known to take this even further, from endless rounds of tuition and enrichment lessons, insistence on the best grades, and of course, entrance into the most famous schools.

In Singapore, admission into a popular primary schools is determined by a few factors. These include the student’s parent being an alumnus of the school, having a sibling who is already a student in the school, or being affiliated with the school through an organisation like a clan association, or volunteering at the school. Of course, proximity to the school plays a part in gaining admission, and that’s where real estate prices come into play.

We typically think of homes within a one and two kilometre radius of these famous schools to be in much higher demand, because they increase the chances of admission into the school. As such, there is a pervading stereotype that these nearby properties command a far higher value.

We looked at three popular schools located in the East, Central and North as case studies to see if the hypothesis holds.

More: Some SG property investors are happier now than they were in 2014

Tao Nan School, one of the most popular schools in the East of Singapore, has the added benefit of being near to shopping malls like Parkway Parade and 112 Katong, as well as access to the beach at East Coast Park. For the most part, median per square foot prices closer to Tao Nan School are slightly higher than the rest of the district, by an average of 1.6 percent. However, this does fluctuate, and there are quarters when prices for the overall district are higher.

Located close to the junction of Bukit Timah Road and Farrer Road, Nanyang Primary School is set amidst some of the most expensive real estate in Singapore. A close similarity we see between both properties around Tao Nan School and properties around Nanyang Primary School is that prices began to fall faster than the respective districts’ declines in the recent quarters.

Like the East Coast, the Bukit Timah area is popular with well-heeled expatriates. Given a shrinking tenant pool and lower yields, we are seeing the effect of landlords offloading non-performing properties is a likely reason for the decline.

Elsewhere in Ang Mo Kio, CHIJ St Nicholas primary and secondary schools are popular with parents. The only time the overall district peaked past properties around CHIJ St Nicholas was during the launch of Aurum Land’s Three 11, which sold 62 out of its 65 units in Q3 2013. However, a likely reason for the more positive numbers for properties closer to CHIJ St Nicholas is that part of the radius falls outside District 20, into the slightly more expensive District 12.

More: Private home sales reach 8-month high

Despite properties closer to the school seeing higher transaction prices than in the overall district, they are still open to larger macroeconomic forces. More often than not, both trendlines moved in the same direction, and saw sustained drops in prices between Q3 2013 and Q4 2014.

In our three case studies, only one saw a clear increase in property prices over the rest of their respective districts. Given that, it is hard to conclude that properties near famous schools are definitely more expensive, or make better investments.

PropertyGuru also recently released the results of the Real Estate Sentiment Survey, with only 26 percent of respondents indicating that proximity to these popular schools played a part in their property buying decision. Two thirds of the respondents who felt this way were between the ages of 30 and 50.

It therefore seems that being close to popular schools might be one of many factors that affect pricing, but is unlikely to be the chief influencing factor.

Read the full article, written by Chang Hui Chew, on

12 tips for investing in Cambodia property

Here are some things to take note of before you invest in the Kingdom

[caption id="attachment_51564" align="aligncenter" width="740"]Sunrise over downtown Phnom Penh Sunrise over downtown Phnom Penh[/caption]

Cambodia is a rapidly developing market, and many investors with lower budgets and higher risk appetites are looking closely at this country to make their next pot of gold.

Tip 1: Foreigners should look at condos

The Cambodian State Constitution prohibits foreigners from owning land. As such, most foreign investors are limited to looking only at purchasing condominiums, or strata-titled units. This means that the title held by the developer can be subdivided into further, individual units for sale. In general, these are newer projects that were built to cater to foreign investment. The bulk of these condos are in the capital city of Phnom Penh, or in tourist spots like Siem Reap and Sihanoukville.

Tip 2: Condos have their own restrictions too

Investors that are looking at condos should also remember that ground floor units are not allowed to be sold to foreigners either. Foreigners are also not able to own more than 70 percent of a single condominium. This should be transparent to the buyer, i.e., the developer will simply cease selling to foreigners once the 70 percent cap is hit. However, these restrictions do mean that foreign buyers should try to move first, to get the choicest units.

Tip 3: Understand where the hotspots are

In general, investors should be looking at three cities in Cambodia for their property investments. These include the tourist destination of Siem Reap, the beachfront resort of Sihanoukville, and of course, the capital city of Phnom Penh. In Phnom Penh, popular areas for high-end development include Boeung Keng Kang in the Chamkar Mon district, and the Russey Keo and Tuol Kuork districts. Investors should always make the trip to the area where they are interested in buying, and take time to understand the characteristics of the area, before they commit.

More: Why Phnom Penh is Asia's next top city for real estate investment

Tip 4: Look for projects with strong security

While Cambodia has come a long way from a troubled past, it continues to place extremely low on global rule of law indices. To safeguard your investment, provide peace of mind, and to increase the attractiveness of your unit to tenants, look for projects that offer strong security features, such as being in a gated community, and has 24-hour security.

Tip 5: Do the math with the currency exchanges

While Cambodia’s official currency is the Riel, its unofficial currency is the US dollar. One can purchase at most shops and retailers using the US dollar, despite the Cambodian government’s long term plans to reduce the circulation of American currency. While the developers might ask for payment in Riel, a lot of associated costs of ownership, such as furniture, could be in US dollars. With a less than favourable US dollar exchange rate at the moment, investors should do the math to see which currency works better.

Tip 6: Look at renowned international developers

Singaporeans might feel more comfortable with going into an emerging market with a developer that they are familiar with. For instance, local developers Oxley, Teho International and TA Corporation have all ventured into Cambodia, and have a number of interesting projects that local investors can look at. Some of these projects are mixed-use developments, with strong investment potential.

[caption id="attachment_51565" align="aligncenter" width="740"]Siem Reap, the gateway to UNESCO World Heritage site Angkor Wat, is another booming property hotspot Siem Reap, the gateway to UNESCO World Heritage site Angkor Wat, is another booming property hotspot[/caption]

Tip 7: Be cautious of oversupply

With aggressive building by developers at price points higher than what most locals can afford, some analysts are worried about oversupply in the near future. According to real estate consultancy Knight Frank, cumulative supply of condominiums is likely to hit around 20,000 units by 2018, up from approximately 2,000 in 2012. Given the thousands of units expected to hit the market in the next few years, foreign investors are advised to hold for a longer term, rather than try to flip units immediately, to allow the oversupply in the market to be absorbed first.

Tip 8: Don’t be shy to ask for discounts

With developers aggressively courting overseas buyers, many are offering strong incentives to sweeten their offerings. We’ve seen furniture packages, guaranteed rental returns, unit management and of course, upfront discounts and rebates. Buyers should try to negotiate for the best deals possible, to minimise the cost of ownership, optimise their rental returns and increase their capital values.

Tip 9: Understand the taxes on ownership

Foreigners are subject to a number of taxes in Cambodia, and investors need to do their sums before committing. Rental income is subject to a withholding tax of 10 percent for residential property and 14 percent for non-residential property. Investors also need to pay property taxes, which is levied at a rate of 0.1 percent of 80 percent of the property value worth over KHR100 million (approximately USD25,000).

More: What you didn't see on TV during the Cambodia Property Awards 2016

Tip 10: Understanding the taxes on sale and transfer

Aside from ownership taxes, there are taxes involved when investors want to sell or transfer their property. Sellers are subject to a 20 percent tax on the profit realised from the transaction, a form of capital gains, or “profit” tax. The Cambodian government will also levy a Value Added Tax of 10 percent on the sale as well. Properties with “hard” titles, which should be the majority of investment properties, are also subject to a four percent property transfer tax, which is payable by the buyer.

Tip 11: Rentals are lucrative in Cambodia

Gross rental returns in Phnom Penh are currently about five to seven percent, higher than many other markets in the region, including Singapore. However, there are other costs when it comes to renting out the units too, including the agent fees. In general, agent fees for rentals are about 8.33 percent to 10 percent, payable by the landlord. Of course, this is negotiable.

Tip 12: Think of alternatives to monetising the property

International tourist arrivals in Cambodia hit 4.7 million last year, according to the Cambodian Ministry of Tourism. An alternative to long term rentals to wealthy Khmers or expatriates is to explore short-term rental options like Airbnb. For investment units in popular tourist spots like Sihanoukville, Siem Reap, or along the river in Phnom Penh, it might be a viable method to monetizing the unit, and sidestep the pressures brought about by oversupply.

This article, written by Chang Hui Chew, was first published in the print version PropertyGuru News & Views. The online version appears on

Do oil prices affect property prices?

The prices of oil and property may not be directly related, but the economic impact of falling oil prices could still affect real estate

Oil prices are constantly in the headlines. While other countries have seen costs of fuel and petroleum-based products go down, costs in Singapore remain high. A real estate executive explains how oil prices and property prices are connected.

Falling oil prices have been in the news for at least the past six months, and property prices are also on the decline. Is there a link between the two?

Before we can understand oil prices, we must first understand how they are calculated. In general, when we talk about oil prices, we are referring to the prices of Brent crude, a particular grade of oil extracted from the North Sea. Brent crude is used to price about two-thirds of the world’s internationally traded crude oil supplies. At time of writing, Brent crude is about USD41.20 per barrel.

On a global level

Figure 1 (below) compares Brent oil prices with global housing prices. Global housing prices are based on the Global Housing Price Index by the International Monetary Fund (IMF), which is an aggregate of real (i.e., inflation adjusted) house prices across countries.

At first glance, there seems to be little correlation between these two asset classes. From 2005 to 2007, both assets appreciated as there was an overall global economic boom which pushed up prices of most asset classes, including bonds, equities and commodities. Then, between 2008 and 2009, markets were hit by the Global Financial Crisis (GFC), which saw both oil and housing prices drop, along with most other asset classes.

However, from 2009 onwards, oil prices recovered alongside the global ecoomy before plunging in mid 2014 due to production outpacing global demand. Global property prices did not follow the oil price trend, showing little correlation between these two asset classes.

On a global level at least, we don’t see a correlation between oil prices and housing prices.

Looking at Singapore

When we compare the Urban Redevelopment Authority’s (URA) Singapore Property Price Index and oil prices, it may seem that they move in tandem (refer to Figure 2). However, oil price movements have been more volatile, especially since June 2014, when it began to plunge drastically.

[gallery type="rectangular" size="full" ids="51307,51308"]

URA’s price index remains relatively stable though it is on a downwards trend. Just like global housing prices, there seems to be little correlation between Singapore property prices and the prices of oil.

However, while oil prices are not strongly correlated with property prices, it is an important commodity that paints a picture of the global economy, and could have an indirect effect on housing prices. Brent crude oil prices have fallen from a high of USD115.19 per barrel on 19 June 2014, to a low of USD26.01 per barrel on 20 January 2016. This translates to a 77 percent drop in Brent crude prices over a span of 20 months.

The most talked about reason for this drastic drop is overcapacity and overproduction since the beginning of 2014. However, apart from supply side reasons, global demand for this commodity also affects prices. A global economic slowdown decreases the demand for oil and places downward pressure on prices. Given both supply- and demand-side pressures on the prices of oil, it is no wonder that prices have fallen as sharply and quickly as they have, placing budgetary pressures on economies that rely strongly on income from oil production.

Grey clouds on the horizon

Now, with the world facing a global economy slowdown, especially in China, the International Energy Agency (IEA) has forecasted that global demand for oil will drop in 2016. In the short run, low oil prices will place pressures on the oil and gas (O&G) sector, and related industries. This could adversely impact the banks that have high exposures to this sector. Furthermore, it is likely that volatility in the equities and commodities markets will persist.

It is more likely that a global economic slowdown will adversely affect property prices in Singapore. With banking and O&G already hit and companies laying off staff, property buyers might be more hesitant to enter the market, especially if job security is a concern. Developers who have more exposure to markets, like China, that have been hit more severely by the global economic slowdown, might also feel bottom line pressures that would cause them to adjust prices as well.

In the long run, low oil prices will be a big boost to the general economy as the cost of production has fallen.  This could lead the next phase of growth. Therefore, low oil prices might not be the cause of doom and gloom that so many news reports mention.

Apart from oil prices being a relevant indicator of global economc growth, there are other indicators that have a more direct impact on Singapore’s property market, such as interest rate movements, the demand for and supply of properties, and government policies.

While cooling measures seem to have negatively impacted the property market, they are necessary to ensure that the market does not overheat, and continues to be sustainable. However, with an impending global economic slowdown, it is necessary to keep a close eye on the market, to make sure it is not too adversely hit, and maintains steady growth.

With lowered prices in Singapore, and various indicators signalling a heavy storm on the way, property owners should review their financial situation. As a top priority, property owners should review their loan packages and see if they are able to refinance to a more stable interest rate package, to manage their interest costs.

More importantly, property owners also need to ensure they can afford their properties. For those who are facing financial pressures, they might need to consider biting the bullet and downgrading. However, property owners who are financially fit can consider taking advantage of lowered prices, and consider upgrading, or rearranging their property portfolios.

This article was written by Alfred Chia, chief executive officer of SingCapital Pte Ltd. It was first published in the print version The PropertyGuru News & Views. The online version appeared on on 24 March 2016.

The views and opinions expressed in the article are those of the author’s and do not necessarily represent the position taken by PropertyGuru and its employees.
Information provided in this publication is general in nature and does not constitute professional financial advice. PropertyGuru will endeavour to update its publication and website as needed. However, information can change without notice, and we do not guarantee the accuracy of information in the publication or on the website, including information provided by third parties, at any particular time.
Whilst every effort has been made to ensure that the information provided is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial planner or your bank to take into account your particular financial situation and individual needs. PropertyGuru does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this publication or on its website. Except insofar as any liability under statute cannot be excluded, PropertyGuru and its employees do not accept any liability for any error or omission in this publication or on its website or for any resulting loss or damage suffered by the recipient or any other person.


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