Bold buyers venture into Indonesian market
Friday, 06 May 2011 00:00Source: The Australian Financial Review
by Lisa Allen
Tired of Bali? Like the French and Dutch, Australians are flocking to Yogyakarta, attracted by the renowned Borobudur temple complex and the city’s reputation as one of Indonesia’s key centres for classical Javanese arts.
Australian tourist arrivals to Yogyakarta, Indonesia’s second most popular city for tourism, jumped more than 15 per cent between 2009 and 2010. Like the French, Australians are now inquiring about buying residential real estate in Yogyakarta as well as other parts of the archipelago.
Meanwhile, some of the untouched islands around Timor and Flores are drawing the interest of cashed-up Aussies. Jakarta, with its modestly priced international standard luxury apartments, is also attracting expat buyers, even though foreigners are forbidden from owning property in the archipelago outright. (They can only buy real estate in partnership with a local.)
But the tough purchasing laws are not dissuading Western buyers. For many Australians, their choice of Indonesian destination is governed by where they live.
For Perth residents, Nusa Lembongan near Bali is attractive, given its similarity to Rottnest Island off the coast of Western Australia. Perth residents are buying up real estate on the Indonesian island in droves.
Darwinians favour the beachfront township of Kupang on the tip of West Timor as a holiday home or cheap retirement bolt hole. Kupang is a mere 820 kilometres from the Northern Territory capital, but its popularity with Darwin residents depends on whether direct flights are operating.
The idyllic island of Lombok, off Bali, is increasing in popularity with Aussies while luxury apartments in Jakarta are a favourite of expats wanting to invest in real estate in Asia.
Jakarta luxury apartments are priced at $US1400 ($1275) per square metre compared with $US21,355 per square metre for Singapore luxury condominiums and $US35,459 per square metre for opulent properties in Hong Kong, Jones Lang LaSalle says.
But rents in Jakarta are much closer to those in other Asian capitals. A luxury apartment there will rent at about $US1 58 per square metre, compared with $US451 per square metre for Singapore and $US749 per square metre for Hong Kong, according to Jones Lang LaSalle.
Westerners, led by Australians and Europeans, are also heading to Yogyakarta. While the Dutch made up the biggest number of arrivals to Yogyakarta between 2009 and 2010, Australians now account for the seventh- largest number of visitors to the popular city in central Java.
Once the capital of the Indonesian archipelago, Yogyakarta is now popular for its language courses at the famed Gadjah Mada complex, Indonesia’s largest university.
The city has a thriving furniture trade and a reputation as a centre for classical Javanese art and culture, including shadow puppet theatre, batik, ballet, drama, music and poetry.
Australian-born Matthew Georgeson, a partner with Indonesian real estate and holiday letting firm Elite Havens, has spent many years living and working in the archipelago.
For him, Yogyakarta’s rents are cheap and there is not yet a big real estate investment market. That has not stopped interest in the city.
“There are lots of French and Dutch involved in the furniture industry in Yogyakarta, a lot of them are long- term expats,” says Georgeson.
Individual investors, financial institutions and companies specialising in land banking are looking to invest in Lombok, he says.
“We are seeing Sumba come into the minds of these people and others are looking at islands off Flores.”
“There is a little island off Bali, Nusa Lembongan, that is the flavour of the month because it’s got magnificent beaches. There’s fantastic diving and no cars are allowed. It’s Bali at its most exotic 20 years ago.”
According to Georgeson, Australian expats living in Jakarta are better off buying an apartment if they have an Indonesian partner because they are often required to pay significant amounts of rent up front.
He says the Indonesian real estate market has remained stable over the past six months because there is still limited financing available.
For Nick Van Helden, previously Jones Lang LaSalle’s country head for Indonesia, Yogyakarta is one of Indonesia’s trendier areas, particularly for people wanting to study for higher degrees.
“It’s a university town, it attracts a mix of educated Indonesians and foreigners and it’s got restaurants and bars that are slightly more Westernised than in the rest of Java,” he says. But, he adds, Jakarta is where the real estate investment action is.
“A lot of expats working or living in Jakarta, especially those married to Indonesians, are buying property,” says Van Helden, who is now based in Perth working as a regional director for Jones Lang LaSalle.
“The price of property in Jakarta compared to the rest of the region, such as Singapore and Hong Kong, represents very good value for money. [But] it comes with risks.
“Most people use a nominee in Indonesia to buy in their name and have a series of legal documents to protect them. A lot of the expats who live up there are married to Indonesians. Foreigners are not allowed to own property.”
Whether you are interested in buying an apartment, land or a house in Jakarta the key thing is the quality of construction.
“I am always getting calls from people in the region wanting to buy property,” he says.
According to Van Helden, about $500,000 can buy a good quality top-end apartment comparable to the best in the world.
“I sold my 250 square metre property in the nicest apartment complex in Indonesia for $400,000. It was Hollywood. It had indoor pools, outdoor pools, the best gym I have ever seen, a putting green, a one-kilometre running track and a beautiful grassed open area.”
Van Helden believes property prices will rise on the back of the strength of the Indonesian economy and the fact they are so cheap compared with the rest of the region. But he warns expats to look for good quality property that is centrally located, given the heavy traffic in Jakarta.
“Prices will rise but the government needs to change the property ownership laws. If I was going to buy property I would buy in Nusa Lembongan because there are no cars. A lot of Perth people are discovering Nusa Lembongan. It’s the Rottnest Island of Perth. It doesn’t have traffic and it’s got good surfing.” But Sydneysider and architect Rodney Jensen likes Yogyakarta
“I think it’s incredibly worthwhile visiting because of its cultural heritage and Islamic architecture. There’s quite an active local heritage society there, too,” he says.
“If anyone is travelling to Yogyakarta I would strongly advise for them to visit the kraton , or sultan’s palace precinct, and walk around it. It’s interesting to see that the walled city around the palace has been filled with single- storey housing and a maze of passageways.
“The ruins of the water palace have a fascinating underground mosque and a tunnel under the former lake area linking it to the palace. There’s also a tower where the sultan would locate himself and watch beautiful women bathing in the pools below,” says Jensen.
“Yogyakarta is very close to the sites of Borobudur and Prambanan which are as significant as Angkor Wat is in Cambodia.”
Source: The Australian Financial Review