Indonesia property to stay soft until year-end, on rate hike, currency pressure: Maybank Kim Eng

Weakness in the Indonesian property sector looks set to continue until the end of the year, according to a recent Maybank Kim Eng report by equity analyst Aurellia Setiabudi.

Second-quarter pre-sales fell quarter on quarter amid a drop in project launches, although pre-sales for the first six months of the year were still up by 39 per cent on the year before, which the report has attributed to purchases ahead of anticipated mortgage rate hikes.

Still, the house expects the full impact of recent rate hikes to be felt in the second half of the year, with property purchases likely to be delayed.

“Continued pressure on the currency would also put off buying by investors,” the report adds, as about two-fifths of pre-sales is estimated to involve investment buyers.

Maybank Kim Eng’s research team has projected that demand is the strongest in the mid-end segment, with developers like Sentul City possibly missing pre-sales targets because of a focus on the middle- to high-end residential segments.

Strong momentum in property sales in the middle-high segment will not be sustainable owing to the interest rate hike, high ownership rate and limited upside in property prices, says the report, which has been bearish on Bumi Serpong Damai targeting this segment.

The report upgrades its rating on the sector to “neutral” on the likelihood that real estate stocks will not fall much further, but adds: “Upside risks to our view are higher-than-expected pre-sales if banks keep mortgage rates on hold, and developers launching more properties in H2 2018 with lower ticket size.”