THE once hot property market here showed signs of cooling during the third quarter, with demand for office space in the central business district (CBD) down as some companies delayed their expansion plans, and sales of condominiums weakening under new regulation, according to Jones Lang LaSalle Indonesia.
Anton Sitorus, head of research at the property consultancy firm's office, here, said last Thursday net take-up for office space - which measures the change in occupied space - in the July-September period fell to 61,000 square metres from 93,400 sq m in the second quarter.
The decline was caused by the economy slowing this year, a depreciating rupiah and rising borrowing costs.
"Concerns of a slowing economy are impacting business expansion plans. Some may have to hold off their office expansion, or review their plan," Anton said.
Bank Indonesia forecasts the country's economy to expand by as much as 5.9 per cent this year, less than the 2012 expansion pace of 6.2 per cent.
The central bank had raised since June its key interest rate by 150 basis points to 7.25 per cent. Such tightening in monetary policy will lead to rising borrowing costs for companies.
In the January-September period, the take-up stood at 275,000 sq m. But by the end of the year, Anton said the office space take-up may match, if not be lower, than last year's 370,000 sq m.
In the third quarter, occupancy rates were stable at 93 per cent. Monthly rental prices rose by 12 per cent to 251,400 rupiah (RM70) per sq m from the previous quarter, which was mostly caused by the rupiah's depreciation as some of the office managers charge their tenants in US dollars.
The rupiah has fallen almost a fifth against the US dollar this year.
Anton said although only fewer than 25 per cent of office buildings in the CBD trade in US dollars, the rupiah depreciation has been sharp and as a result that has supported the price increase.
Meanwhile, condominium sales in the third quarter were the lowest by volume in the past five quarters, on higher interest rates and with the implementation of a new minimum downpayment regulation.
Bank Indonesia tightened the mortgage regulation by increasing the down payment on a second home to 40 per cent and a third home to 50 per cent.
Luke Rowe, head of residential consultancy at Jones Lang LaSalle, said the down payment regulation is cooling the property industry as it takes speculators off the market.
Benedictus Agung Swandono, an analyst at Samuel Sekuritas, said the property sector has reached the peak of its business cycle this year, following a boom period in the past three years.
The latest Bank Indonesia downpayment requirement - to as much as 50 per cent from 30 per cent previously - and a ban on pre-order purchases - buying the house before it's been built - have suppressed both demand and supply, Benedictus said.
"This time BI (Bank Indonesia) really got them. Previous down payment requirement in 2012 had many loopholes," he wrote in a report on Wednesday.
Benedictus also said the ban on pre-order purchases, except for first-time home buyers, would disrupt developers' cash flow.
Developers that rely heavily on recurring incomes, such as rent from office space or shopping malls, can survive the down cycle in the property business, he said.
"Sales of office space can also compensate for the slowdown in residential sales, as BI rules do not limit it," Benedictus said.
Average loan interest for condominiums increased to 9.2 per cent in August, from 8.7 per cent in May, according to the latest available Bank Indonesia data. Average home mortgage rates, however, remained at 10.3 per cent during the period.