Sluggish sales bog down Indonesian real estate

Pre-sales are tipped to inch up by a measly 2.2% in 2019.

It appears to be an increasingly dismal year for Indonesia’s property sector as pre-sales could further decline during the first six months of 2019, according to UOB Kay Hian.

Pre-sales extend its quarterly decline in Q4 2018 to crash 47.0% YoY drop to Rp3.9t, which represents the weakest quarterly performance in the last five years. For the full-year period, pre-sales went fell 1.8% YoY to Rp20.3t.

As reported by UOB Kay Hian, this is attributed to a weakness in all segments that include residential and land plots.

“Developers might have limited time to launch new projects in 1H19, given the upcoming elections and the Lebaran holidays.Hence, we expect lower YoY pre-sales in 1H19,” said Edward Lowis, analyst of UOB Kay Hian.

However, the sector might slowly recover as pre-sales are slated to go up by 2.2% YoY.

Both residential pre-sales and apartment pre-sales rose by 6.1% and 71.9% YoY in 2018 respectively following poor performances in the prior years.

Lowis also warned that property developers should brace for lower earnings given lower revenue backlog from weak pre-sales. However, land sales should fuel earnings growth.

On the other hand, mortgages would grow stable as lenders focus more on credit growth. There is also limited risk of further benchmark rate hikes in the medium term following a strengthening rupiah against the dollar. Mortgages could grow 12% YoY in 2018, the highest growth in the last four years.