Fuel-price hike drives property market skyward
Tuesday, 27 March 2012 00:00
Source: The Jakarta Post
By Ni Komang Erviani
Although the government has yet to announce the final decision on the planned fuel price hike, property prices on Bali are already rising.
Real Estate Indonesia’s (REI) Bali branch chairman Dewa Putu Selawa said property prices have increased 15 percent on average since early March, when the government disclosed its plan to increase the price of subsidized fuel by Rp 1,500 (16 US cents) to Rp 6,000 as of April 1.
“The increase is not only because the rising price of construction materials. The property business is very sensitive to rumors and discourse. Once the discourse of the fuel-price hike started, all property businesspeople reacted by increasing the prices,” Selawa said recently.
Selawa said that those in the real-estate business showed various reactions, depending on their capital. About 25 percent of the island’s real estate tycoons who had hefty capital were holding onto their property stock while waiting for the government’s final decision.
“Many businessmen canceled the sale of their properties because of the discourse. That’s because the prices would again increase when the fuel price is hiked. They were waiting to get the highest profit.”
Those with small capital had no choice but to sell their properties at the current prices.
The Bali branch of REI has 72 members, 25 percent of whom had a large amount of capital.
Selawa himself raised the prices of his properties.
“I have a property that is worth Rp 350 million per 100 square meters. Due to the discourse on fuel-price hike, I increased the price up to Rp 500 million per 100 square meters. When the fuel price is hiked, the prices of other needs would increase and the land prices would also increase,” he said.
He is confident that property prices would not fall, even if the government abandons its plan to increase fuel prices.
“Don’t ever expect that property prices will go down. The property prices will always rise,” he said.
Another property developer, Widiana Kepakisan, said that the discourse about fuel prices has increased the price of building materials, transportation, as well as cost of labor.
“The discourse has automatically driven the increase of land prices,” he said. “Fuel is like a political commodity. Once the government in Jakarta said they will increase the price, it affected businesses in this island automatically.”
Widiana also increased the prices of his properties in Jimbaran.
“A unit of house type 70, which was worth only Rp 825 million before the discourse, now is priced at Rp 925 million per unit,” he said.
Bali has the highest rate of increased land prices in the country.
A recent study by Knight Frank and Elite Havens shows the price of land in Bali increased by an average 34 percent in 2011, while the normal growth rate was only around 8 to 16 percent.