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Sector Outlook
Indonesian property unequivocally sat on a downward trend with Foreign Direct Investment (FDI) in real estate sector slipped to USD455 bn in 1H18 or decreased by
15% YoY. The decline in real estate FDI contrary to total FDI growth which still improved 7% YoY to USD8.99 bn. Up to 1H18, the contribution of real estate FDI to
total FDI stepping down by 134 bps to 5.06% from similar period in 2017.
Source : BPKM, BI
However, we believe that Indonesia’s current massive infrastructure development is still attractive to overseas developer groups especially from Asian countries such as
Japan and China. Local property developers such as BSDE, ASRI and BEST could be benefited from the inflow through the establishment of JVs with those foreign
developers. We expect the situation could help mitigate the down cycle in local developer as we forecast Indonesian economic growth of 5.1% in 2019.
The residential property market is relatively in at better state compared to other subsectors as the growth in house prices were more sustainable at aggregate 3.3% YoY in
2Q18 and according to BI prediction will maintain at 3.3% in 3Q18. Other subsectors however, represented through commercial property index which is subdued at 0%
YoY in 2Q18 with growth only shown by convention hall at 6% YoY thanks to seasonality. Meanwhile, industrial estates and apartments each grew by 1% YoY with other
subsectors lagging at 0% to 2% YoY.
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10/29/2019 Ciptadana Sekuritas Asia | News
Source : BPKM, BI
As we project real GDP growth to strengthen to 5.3% in 2019, we estimate the overall growth in house prices will remain flattish at 2%-4% YoY. We do not expect a
strong price upsurge across the country unless the economy expands at a more rapid rate and overall confidence in the economy scales a new high. The house price index
growth though still increasing annually, has been damped in the last three years and touched a new low of 2.4% YoY in 4Q16.
The prospect of property industry is currently pinned by three negative sentiments which are: 1) interest rate hike, 2) risk arises from political year, and 3) rupiah
depreciation. Several property developers acquired negative free cash flow and low cash position hence has difficulty to pay their short term loans. Three companies with
positive cash flow are PWON, BSDE, and DILD. Some of the companies hedge their US denominated loan up to Rp15,000/USD such as PWON and APLN, meanwhile
BSDE and BKSL do not hedge their loan. Meanwhile, company with no exposure to USD loan is DILD.
As of Sep 18, the 7 days RR stood at 5.75% which meant the benchmark has increased by 150 bps since the beginning of 2018. In Exhibit 4 we can see how JAKPROP
Index has an inverse effect against interest rate.
Source : Bloomberg, BI
In Jul 18, BI has lowered the Loan to Value (LTV) requirement up to 100% for new home buyers. However, market has shown lack of positive response to the
aforementioned incentive and we expect the recent benchmark rate hike will send a fresh blow to already lethargic property industry.
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10/29/2019 Ciptadana Sekuritas Asia | News
Source : BI
The extremely slow price appreciation of high-rise residential properties in Jakarta reflects the abundance of supply of such development. However, house price
appreciation should be more pronounced in the coming years due to 1) traction gained from the MRT and LRT development within Greater Jakarta, 2) renewed
confidence due to the economy’s strong performance, and 3) increasing scarcity of land closer to the urban centres.
We expect slower rate of new commercial spaces in Jakarta as the last two years supply has been abundant. According to Colliers International, there will be a total of
390k sqm of newly available office space in 2019, almost 30% less than new office space scheduled to complete in 2018. The new office space will be coming in from
three towers within Jakarta CBD and 5 towers on outside CBD.
In line with the drop in occupancy rates, rental rates also came under pressure and were flattish. The office occupancy rate in Jakarta CBD is at all time low 79% expected
by the end of 2018.
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10/29/2019 Ciptadana Sekuritas Asia | News
Top picks
We see limited positive catalyst for property industry hence NEUTRAL view. However, based on RNAV all of the stocks are undervalued hence attractive to investors
with longer horizon. We pick SMRA, PWON and DILD as top pick based on their stable performance which likely to sustain in the coming year.
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