Quarterly Report

JAKARTA | EXPATRIATE HOUSINGQ2 2016 Accelerating success.

Expatriate Housing SectorFerry Salanto Senior Associate Director | Research

There were signs of recovery during H1 2016 with number of repeat corporate clients who signing new one-year lease con-tracts. Many companies employing expats are currently only willing to commit to a maximum one-year contract; very few of them are willing to accept two years rent in advance.

Forecast at a glance

Market OverviewThe expatriate housing market started to show signs of recov-ery during the first semester of 2016. A number of inquiries came mostly from repeat corporate clients who sign one-year contract extension (as opposed to the traditional two-year con-tracts). Many expat employing companies are currently only willing to commit to a maximum one-year contract and very few of them are willing to accept two years rent in advance even if the working permit of the employee has been issued for a two year period. Furthermore, many landlords are willing to negotiate less than one year lease extension due to the real-ization of the current market condition and the drastic drop in inquiries for expat housing. In some cases occupiers are taking advantage of the situation and may relocate to other residential projects that offer either lower rents or at least equal rents but with better amenities. Typically multinational companies prefer their expat employees to reside in housing compounds rather than in stand alone houses for security reason. Residing within a compound or in a serviced or regular apartment building al-lows these companies to take advantage of security measures that are already in place. This is often the easier security solu-tion for both the employee and employer.

Well-developed housing compounds such as Executive Para-dise, Atmaya Residence and Astoria Residence continue to at-tract a sound number of tenants and continue to maintain their high occupancy despite the current market condition.

Executive Paradise is one of the largest housing complexes which is developed on 20 hectares of land in Cilandak, South Jakarta. This complex provides a relaxing and peaceful sanc-tuary seemingly set away from traffic noise and air pollution making it one of the most popular choices within the expat community. , Situated right next to Executive Paradise, Astoria Residence complex offers luxury houses featuring 4-5-bed-rooms and each unit is equipped with a swimming pool and ample living space. Developed specifically to service the expat community, Astoria Residence tenants can also take advan-tage of the club house and mini market located in the adjacent Executive Paradise compound.

DemandBesides power related industries, we anticipate one of the driving factors creating demand for residential property will be the infrastructure sector.

RentLandlords are being forced to be more realistic about rental rates, increasing their marketing efforts and being open to alternative rental models. In certain cases landlords are willing to negotiate and adjust the rental rate down by as much as 35% in order to lease their property rather than lose income by leav-ing the units vacant.

2 Quarterly Report | Q2 2016 | Expatriate Housing | Colliers International

The rising supply of newly completed upscale individually-owned apartments together with the reduction in the number of expatriates entering the country have been a major factor in pushing landlords to offer more favorable rental rates and more attractive contractual terms for tenants. Consequently, landlords are being forced to be realistic about the rental rates, increasing their marketing efforts and being open to alterna-tive rental models. In certain cases the landlords are willing to negotiate and adjust the rental rate down by as much as 35% in order to let their property rather than losing income by leaving the units vacant.

The number of expatriates arriving (those being issued working permits) has yet to recover. According to data from Ministry of Manpower, the number of expatriates with a working permit during January-February 2016 was still 41% lower compared to the same period in 2015 (8,980 people).

Source: Ministry of Manpower of the Republic of Indonesia

Annual Number of Expatriates with Working Permit in Indonesia

2011 2012 2013 2014 2015Jan – Feb

2016

#expatriates 77,307 72,427 68,957 68,762 69,025 5,339

The second quarter of each year (April – June) is typically the peak season for obtaining new inquiries from expatriates who are assigned to work in Indonesia. During this period orienta-tion activities intensify prior to their relocation process in order to understand and appraise the geographical situation while at the same time familiarizing them with the local culture. Dur-ing their familiarization trips, normally they will view houses or apartments, medical facilities, supermarkets, shopping malls, to get an idea of where they might want to live in Jakarta. For ex-patriates relocating with children, the proximity to the preferred international school will typically take first priority in deciding home location. Normally the relocation details need to be de-cided prior to the start of the school academic year in August or September.

The plummeting global oil prices have pushed corporations in this sector to restructure their operational cost, including bud-gets for their expatriates’ accommodation. This sector has ex-perienced a downward trend over the last few years and thus businesses have been forced to streamline their expenses. Budgets have been reduced therefore pressuring multination-als to reduce the number of expatriate workers overseas or be more provident with the individuals that are currently in coun-try. One of the ways this is being implemented is by searching for a more affordable accommodation. Currently finding vacant houses and apartments for lease is not as challenging as in previous years. Based on our data, during 2012 – 2013, the vacancy rate of typical expatriate homes was below 10 percent, while on the contrary, since 2014 onward the vacancy rate is expected to hit a double digits as we have witnessed in the first quarter of 2016.

Amid the slowing global oil and gas business, other sectors seem to bring exuberance to the expatriate housing market go-ing forward. In line with the government’s massive plan to pro-vide adequate energy supply, some major multinational compa-nies have already started to play a part in this sector. Besides power related industries, that are anticipated to become one of the driving factors for residential needs, the infrastructure sec-tor seems to also become a trigger to create demand.

During the current sluggish market where the amount of hous-ing inquiries has noticeably diminished, landlords are generally accommodative to the clients’ needs particularly amid the glut of residential supply. This situation has forced landlords to be more flexible in deciding the rental tariff, or alternatively have an empty cash-burning dwelling. During the first semester of 2016 we have experienced discounts ranging between USD50 to USD1,000/unit/month for standard expat housing compared to the previous semester. Based on our experience, the biggest discount was granted for relatively small stand alone houses with the size of 400 – 500 sq m which previously commanded a USD5,000/unit/month price tag. This is unquestionably due to the number of vacant units of this type of housing currently available on the market. More luxurious homes are not as sub-ject to this range of discount because of the reduced number of units available.

Housing Rental Rates in Several Expatriate Areas

expatriate housing by area size (sq m)offering rental rate per unit

(usD/unit/month)minimum maximum

Menteng     4 - 5 Bedrooms House 500 - 1,200 4,000 12,000

Kuningan    4 - 5 Bedrooms House 500 - 900 4,000 8,000

Pondok Indah    4 - 5 Bedrooms House 450 - 1,000              3,500 10,000

continued

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expatriate housing by area size (sq m)rental range (usD/unit/month)minimum maximum

continuationKebayoran Baru    4 - 5 Bedrooms House 600 - 1,500              3,500 10,500    3 - 4 Bedrooms Townhouse/complex 250 - 700              3,000 4,000

Permata Hijau    4 - 5 Bedrooms House 400 - 1,500              4,050 10,800    3 - 4 Bedrooms Townhouse/complex 220              3,150

Kemang    4 Bedrooms Townhouse/complex 400 - 700              3,000 4,500    3 Bedrooms House 400 – 750              2,500 4,000    4 - 5 Bedrooms House 550 - 1,000              4,000 5,500

Cilandak    4 Bedrooms Townhouse/complex 300 - 700              3,000 6,000    3 Bedrooms Apartment + Study 300 - 600              2,500 3,500    4 - 5 Bedrooms House 450 - 750              3,500 5,500

Cipete    3 Bedrooms Townhouse/complex 200 - 300              2,500 3,500    4 Bedrooms Townhouse/complex 400 - 700              3,000 4,500    3 Bedrooms House 300 - 500              2,500 3,000    4 - 5 Bedrooms House 400 - 800             3,000 4,500

Pejaten    3 Bedrooms Townhouse/complex 400 - 600              3,500 4,500    4 Bedrooms House 500 - 900              3,500 5,500

Source: Colliers International Indonesia - Research and Residential Tenant Representation

Apartment for ExpatriateDespite not having as many units available, the management of some selected expatriate apartment projects introduced an increase in the rental rate by 5% over the reviewed period. The apartment market which aims at shorter termed expat tenants benefits from the downsizing in the contract tenure from typi-cally two to three years employment contract to a shorter-term of less than one year. Serviced apartment accommodation is more flexible in the tenure terms compared to landed houses and therefore is becoming increasingly popular among expatri-ates.

A typical two-bedroom non-serviced apartment (including stra-ta-title apartment which was rented to the expatriate) is offered from a minimum of IDR18 million to a maximum of IDR56 mil-lion/unit per month, while a three-bedroom is offered ranging from IDR29 million to IDR78 million/unit per month. The most expensive non-serviced apartment is located in Kebayoran Baru area, e.g. Dharmawangsa, and is offered from IDR72 million to IDR130 million/unit per month for 4 to 5-bedroom apartments (penthouse). A two-bedroom serviced apartment is offered from a minimum IDR45.5 million to a maximum IDR67.5 mil-lion/unit per month, while the three-bedroom is offered ranging from IDR42 million to IDR94.5 million/unit per month. Further, serviced apartment units of more than 3-bedroom are offered ranging from IDR73.5 million to IDR176 million/unit per month.

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Apartment Rental Rates in Several Expatriate Areas

apartment by area size (sq m)rental rate (in usD/unit/month)

non-serviceD apartment serviceD apartment

Sudirman 2 Bedrooms Apartment 106 - 145 32 – 52 46 – 67 3 Bedrooms Apartment 158 - 320 45.5 - 78 68 – 94.5

Menteng 2 Bedrooms Apartment 90 - 142 35 – 51 54 – 56  3 Bedrooms Apartment 124 - 213 39 – 65 70  4 Bedrooms Apartment 319 176

Kuningan 2 Bedrooms Apartment 120 - 145 20 – 32.5 45.5 – 67.5 3 Bedrooms Apartment 157 - 166 32.5 – 39 49 – 52 4 Bedrooms Apartment 440 45.5

Pondok Indah 2 + 1 Bedrooms Apartment 117 - 190 42 – 48 45.5 - 55 3 Bedrooms Apartment 190 - 455 45.5 – 68 52 – 70 4 - 5 Bedrooms Apartment 285 - 455 66 – 71 73.5 – 83

Kebayoran Baru 2 Bedrooms Apartment 140 - 203 42 – 56 3 Bedrooms Apartment 243 - 302 58.5 – 78 4 - 5 Bedrooms Apartment 330 - 500 72 - 130

Permata Hijau, Simpruk 2 Bedrooms Apartment 105 - 115 40 – 41

3 - 4 Bedrooms Apartment 165 - 300 35 – 52 42 - 46

Kemang 3 Bedrooms Apartment 165 - 303 32.5 – 58.5

Cilandak 3 - 4 Bedrooms Apartment 164 29 3 Bedrooms Apartment + Study 300 58

Cipete 3 - 4 Bedrooms Apartment 220 - 295 52 – 78

Pejaten 2 - 3 Bedrooms Apartment 102 - 191 18 – 29

* exclude breakfastSource: Colliers International Indonesia - Research and Residential Tenant Representation

Copyright © 2016 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Accelerating success.

For more information:Ferry SalantoSenior Asociate Director | Research+62 21 3043 6888ferry.salanto@colliers.com

Contributors:Hern Rizal GobiAssistant Manager | Research

OccupancyIn general, middle-upper to upper-class apartments experi-enced a 3% drop in occupancy compared to the last semester of 2015, hitting 79%. Though small, this decrease in occupancy is inevitable, particularly due to the slowdown in the number of expanding companies that generate demand for this segment. The preferred areas remain the CBD (Rasuna Said, Satrio and Sudirman) and South Jakarta, including Oakwood, The Ascott, Golf Pondok Indah Residence and Shangri-La Residence.

Source: Colliers International Indonesia - Research

average occupancy rate of selected apartments preferred by expatriates

Notes:

A: Dharmawangsa, The Capital Residence, SCBD Suites, Pakubuwono Residence, Oakwood

B: The Residence at Ritz Carlton, Plaza Senayan, The Plaza Residence, Airlangga Apartment, Senayan City

C: Setiabudi Residence, Golf Pondok Indah, Somerset Grand Citra, The Ascott, Menteng Executive

D: Aston Rasuna, Somerset Berlian, Puri casablanca, Casablanca

E: Taman Rasuna, Palm Court, Puri Imperium

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