BRIEFING July 2020 Savills Research Luxury Apartment Trends...Luxury Apartment Trends – July 2020...

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July 2020 Luxury Apartment Trends BRIEFING Savills Research

Transcript of BRIEFING July 2020 Savills Research Luxury Apartment Trends...Luxury Apartment Trends – July 2020...

Page 1: BRIEFING July 2020 Savills Research Luxury Apartment Trends...Luxury Apartment Trends – July 2020 5 Despite high quality and good amenities offered by luxury apartments projects

July 2020

Luxury Apartment Trends

BRIEFING

Savills Research

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luxury apartment is perceived as a

symbol of prestige and achievement

among wealthy individuals in most

metropolitan cities around the world. As the

capital city of Indonesia, Jakarta has seen an

increasing number of luxury apartment projects

over the past decades. Yet, compared to

neighboring countries, the luxury apartment

market in Jakarta is relatively small and yet to

attract interests from overseas investors so far.

On the other hand, a lot of Indonesian high net

worth individuals (HNWIs) bought apartments

offshore like in Singapore, HK, Sidney, even in US

cities. In this publication, we try to explore

various factors contributing to this phenomenon

and why the local market lags from the others.

Luxury apartment is defined as premium grade residential property with spacious rooms and top amenities. They are

typically located in prime districts such as the downtown or CBD Area. Typical amenities in luxury apartments are of

highest quality with exclusive ambience, while standard facilities normally include world class resort garden and sport

facilities such as Olympic-size swimming pool, exclusive spa, high-end fitness, executive valet service and in several

cases, complimented with fine dining restaurants.

In Jakarta, luxury apartment was initially introduced around early 1990s in Kebayoran Baru, South Jakarta with

Apartment Permata Hijau among the first developments. Kebayoran Baru district is a popular location for expatriate

community in Jakarta, thus it became a preferred area for pioneer projects as developers targeting expatriates as the

primary users. Later, luxury apartment projects expanded to strategic areas such as Kuningan, Senayan and Setiabudi,

closer to Jakarta Commercial Business District to attract not only foreign expatriates, but also local rich families and

investors. Along with commercial developments in Jakarta CBD between late 1990s to 2000s, luxury apartments had

also expanded in prime districts of Sudirman, Thamrin and Gatot Subroto, with more high-end projects which typically

branded with international five-star hotel-operator to manage the premises and its facilities.

A

Luxury Apartment Definition (Jakarta)

Total units: approx. 100-200 units/tower Facilities: complete international standard amenities

Typical unit size: over 250 sqm (minimum 3 BR)

Building material: premium quality with top finishes

Location: CBD or upscale residential districts

Average price: mostly above Rp 50 million per sqm

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Luxury apartment developments in Jakarta reached its peak around early 2000s then in 2012 but later slowed

down from 2016 onwards. Amid some new projects between 2017 and 2019, supply growth is anticipated to remain soft until 2023. In order to help and support

market growth, Ministry of Finance issued Luxury Tax (PPNBM) amendment in 2019 – since then buyers are required to pay 20% PPNBM for apartment priced at above Rp 30 billion – previously Rp 10 billion.

In term of supply distribution, Jakarta CBD contributes more than half of total luxury apartment supply in

Jakarta, with around 56%. Meanwhile, as a popular district for expats and affluent community, South Jakarta dominates the existing supply in the Non-CBD area, accounted at 36%. Prime areas in this region

include Kemang, Pondok Indah and Dharmawangsa.

Recently, a number of foreign developers had also participated in the luxury apartment development in

Jakarta. These foreign players were attracted to expand here due to large number of local HNWIs from major cities like Jakarta, Surabaya and Medan.

Some of their projects are labelled or linked to international chain hotels. Recent entrants include: • Hongkong Land completed the development

Anandamaya Suites in prime Sudirman area.

• Pollux Properties from Singapore launched Pollux

Sky Suites in Mega Kuningan district. • Sun and Moon Dharmawangsa by Tatemono

Japan launched a high-end project in plush area of Dharmawangsa, an upscale residential neighborhood close to the CBD.

Luxury Apartment Performance

56%

1%

36%

5% 2%

CBD CJ SJ WJ NJ

49%

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SOUTH JAKARTA

Prime residential areas in South Jakarta are located relatively close to the CBD area for example Senayan and SCBD area, thus these areas are highly preferred by most buyers.

In 2012, average price in South Jakarta rose significantly to around Rp 24mil/sqm, increased by around 63% from Rp 14,7mil/sqm in previous year.

By 2019, the average price of luxury apartment in this region stood at around Rp 48mil/sqm.

JAKARTA CBD

As the most prime district in the capital city, apartment projects in Jakarta CBD command the highest level compared to other regions. The peak of price growth took place between

2013 and 2014 period, which resulted at average market price of around Rp 55 mil/sqm. Along with the softening in the past couple of

years, the average price in Jakarta CBD now stood at around Rp 52 mil/sqm.

WEST & NORTH JAKARTA

West and North Jakarta are popular location among local Chinese affluent community. There are a number of quality developments in this region, yet compared to CBD and South Jakarta,

the average price in West and Noarthj Jakarta are much lower. The average price in 2017 was around Rp 27mil/sqm and relatively stable at

that level until now.

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PRICE TRENDS IN JAKARTA

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Despite high quality and good amenities offered by luxury apartments projects in Jakarta, the market grew at relatively

slow pace compared to other markets in the regions. Furthermore, current property law still limits the ownership of

foreign buyers or investors in the local market. Following is more detailed descriptions of regulatory environment as

well as price growth in each of major market in ASEAN as comparison.

BANGKOK

Foreign Ownership Terms and Condition o Allowed but no more than 49% of total units in a single

apartment project can be owned by foreigner o Purchase transaction must be from foreign currency,

transferred from original bank to Thailand Bank o The exchange into Thai Baht must be done in Thailand.

Price Average luxury apartment in Bangkok stood at approximately THB 150,000 or equal to USD

4,750 per sqm. In CBD area, approximate price for one-bedroom unit is around THB 10 million or equal to USD 317,800 per unit.

Taxation Property taxes and fees in Thailand are very low, they don’t charge annual property tax, but buyer must pay some taxes and fees when buying new apartment in Bangkok:

a. Transfer Fee

2% of the official government appraised value of the property paid by seller and buyer (1% by each party) to Thai Land Department in order to transfer ownership of the apartment.

b. Stamp Duty 0.5% of the appraised value or agreed sales price paid by seller.

c. Specific Business Tax 3.3% of the government appraised value or agreed sales price, whichever is higher. Specific business tax is payable by companies and individuals who have owned the apartment less than 5 years.

d. Income tax/Withholding Tax Tax must be paid by owners who sell their property. The final calculation is based on property appraisal value, ownership period and deduction based on depreciation value.

Si Lom The heart of big company, luxury apartment,

and shopping centre. Integrated to public

transport like Silom BTS Line and MRT Metro.

The district covers Sathorn Road, Silom Road

and the sois between Saladange, Nanglinchi.

Sukhumvit Apartment price could range widely since it

has various segmentation. Luxury apartment

located close to city center along Sukhumvit

Rd Soi 1 to 63 (North Side) and Soi 2 to 42

(South Side)

Lumphini Favorable for expats, tourists and affluent

Thais due to traffic-free, high-end shopping

centre, and integrated to various public

transport. Known as the safest place since

there are embassies along Wireless Road.

Riverside Located along Chao Praya River. Expats,

retires and locals favour to invest their

second home since it has marvellous

scenery of Bangkok.

KE

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KUALA LUMPUR

Foreign Ownership

Allowed with requirements i.e. minimum selling price of approximately MYR1 million or equal to USD240,027 per unit. However, to boost the market, in 2020 government has cut foreign buyer price threshold to MYR600,000.

Price

Average high-end apartments transaction price in Kuala Lumpur is about MYR8,800 - 14,700 per sqm or USD2,112 - 3,528 per sqm. While newly launched project offered more than MYR21,100

per sqm or USD5,064 per sqm.

Taxation

Sales Taxes a. Stamp duty

Frequently paid on the sale of property that paid by buyer. Rate of stamp duty is set progressively: 1% on the first MYR100,000, then 2% up to MYR 500,000 and 3% above that. In addition, if buyer using bank loan , they

have to pay stamp duty 0,5% of loan amount. b. Real Property Gains Tax

Paid by property owner who sold their property. Owner is not required to pay the capital gain, but they are required to pay specific tax on gains from property. As of 2020, government had revised the RPGT imposed on

the disposal of properties after five years period, by individual citizens and permanent residents, by setting the market value on 1st January 2013 as the property acquisition price for properties acquired.

Maintenance Taxes a. Assessment Tax

Tax that is based on property rent annual value, paid by owner to the local authorities. Rate is assessed by local authorities, but commonly around 4%-6% of rental value and it is payable in two installments.

b. Quit Rent A local tax levied on all landed properties and paid yearly by the owner to state's government. The rate varies, depends on the state government. The rate range is between 1 sen - 2 sen per square foot. The quit rent

liability is generally estimated to be less than MYR100 or USD 24 per year.

KEY LOCATIONS

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HONG KONG

Foreign Ownership

HK applies leasehold policy for all lands. Hence, foreign investor has the same property ownership right as locals.

Price Hong Kong apartment offering price is approximately from USD 25,000 per sqm. This impressive price is due to

Hong Kong enormous population that is not equally facilitated. In addition, limited land capacity generates high rise residential development.

Taxation Apartment tax is payable annually by the owner at the standard rate 15% of net assessable value by the year of assessment starts on 1 April and ends with 31 March in the following year. Net Assessable Value is calculated from “assessable value” which computed from the rental income paid or payable to the owner as well as other income to

owner in regards of giving the right of use of the property.

KEY LOCATIONS

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SINGAPORE

Foreign Ownership

Under the Residential Property Act, foreigner can buy public housing or private property without approval from Singapore Land Authority, they are treated similar compared to Singapore Citizen. While for landed

residential, foreigner inquires government approval first. It known that most of expensive apartments in Singapore are bought by foreign investors.

Price

Major foreigners who buy luxury apartment in Singapore are Chinese millionaires from mainland China. In 2019, more than 70 units apartments with price more than S$5 million/unit or USD3.6

million/unit bought by Chinese citizens. Mainland chinese are the biggest group of foreign buyers of Singapore luxury apartments.

Taxation a. Additional Buyer's Stamp Duty (ABSD)

Foreigner pay 15% of total value of apartment, for permanent residents only 5% for first property and 10% on

subsquent purchases, while for Singapore citizen, they won't pay for first property, 7% for second property and 10% for subsquant property.

b. Annual Property Taxes

Annual property tax rates are progressive, based on annual rental value. There are 2 types of annual property tax rates : Owner-Occupied Property Tax Rate (if you are staying in property) and Non-Owner-Occupied Property Tax Rate (if you renting the property). For foreigner and permanent residents, they must pay additional 10% on top of each rate.

KEY LOCATIONS

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CONCLUSION

Regulatory environment is perceived as one of the main constraints for luxury apartment market in Jakarta. Limitation on property ownership by foreigners and high

taxation are two major factors contributing to low competitiveness compared to other markets in the region such as Bangkok, KL, HK, Singapore, Manila and even

HCMC in Vietnam. Despite many local HNWIs, the luxury apartment market size in Jakarta is so small at less than 25,000 units in existing supply. This trend reflects

the habit among Indonesian rich community to choose to spend abroad rather than in the country. Meanwhile, expatriates and foreigners living in Indonesia have

difficulties to buy apartments here as almost every development so far had never been built on Hak Pakai land title.

On the contrary, Jakarta is the cheapest market compared to others despite the development quality offered in most projects are highly comparable or even better

than few other markets. This actually provides a good foundation for Jakarta to compete to attract foreign buyers or investors. As the biggest economy in ASEAN and

emerging powerhouse, Jakarta has a potential to attract overseas businesses to expand in the country. As such, demand for quality residential with international

standard amenities will continue to grow and accordingly, the luxury apartment market is seen to become a prospective investment in the longer term.

Jakarta Bangkok Kuala Lumpur Singapore Hongkong

Average Price Starts from USD2,800 per sqm Starts from USD4,750 per sqm Starts from USD5,064 per sqm Starts from USD14,400 per sqm Starts from USD18,270 per sqm

Taxation 20% luxury tax (PPNBM), No additional tax for luxury apartment

No additional tax for luxury apartment

No additional tax for luxury apartment

No additional tax for luxury apartment

No difference in property tax for locals and foreigners

No difference in property tax for locals and foreigners

Foreigners have higher tax than locals

Foreigners have higher tax than locals

No difference in property tax for locals and foreigners

Foreign Ownership

Hak Pakai (Right of Use) title with minimum price of Rp 1 billion or around USD 70,000 per unit.

Freehold without minimum price, but foreign ownership in a project is limited up to 49% only.

Freehold with minimum price of RM600,000 or around USD144,000 per unit

Leasehold no minimum property price

Leasehold no minimum property price

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Author

Anton Sitorus Miranda Gultom Nadira Dwiputri

Please contact us for further information

Savills Indonesia Savills Research

Jeffrey Hong President Director Savills Indonesia

+62 21 293 293 80 jef f [email protected]

Anton Sitorus Director, Research Consultancy +62 21 293 293 80

[email protected]

Simon Smith Senior Director Asia Pacif ic

+852 2842 4573 [email protected]

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