Australian and NZ property offers lucrative business

Sunday, 6 July 2003 - The Jakarta Post

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By Debbie A. Lubis Contributer Jakarta

Buying a second home in Australia and New Zealand is not an issue among high-heeled Jakartans, but an increase in demand from other parts of Indonesia shows that property is still a lucrative business.

Matthew Georgeson, general manager of Brady Property Consultancy Indonesia, said that besides Jakartans, demand for Australian property had also increased rapidly among the rich from major cities such as Surabaya, Medan, Manado, Makassar, Bandung, and Semarang.
"In fact, eastern regions are one of our very best markets. The demand has increased because there are many Indonesian students from those regions that pursue their studies in Melbourne, while businesspeople have shown great interest in making investments there," he said. The robust growth of the market had prompted the Brady Group to open its branch in Jakarta four years ago.

Oka Mahendra Kauripan, systems and technology manager at property agent LJ Hooker, also admitted to the increase in demand for purchasing Australian property recently, especially in areas like Perth, Melbourne, Sydney and to some extent, Queensland.

Midli Christin, Brady's marketing executive, said that many investors were also eying property in Melbourne because it offers a good panoramic view, affordable prices and a potential for profiting from resale. In contrast," Sydney property prices have peaked, while the market does not give any leeway for a price increase if the property is resold. Many buyers now purchase property as an investment, instead of for student accommodation," she said.

Indonesians mostly tend to purchase apartments instead of houses since most of the apartments are located in Central Business District areas with their access to transportation and proximity to educational and shopping centers, while residential areas are located in the suburbs. Depending on the size of the family, buyers from Indonesia also prefer three-bedroom apartments.

"I bought a two-bedroom apartment because its monthly installment is almost the same as the monthly rent. Besides, it's a kind of investment. I can lease or sell it as soon as my children graduate from university in Sydney, or perhaps I can stay there after I retire," said Linda Jatnika, who lives in Surabaya.

Most of the apartments come with a complete kitchen and a closet, which are provided by the developer.

Midli Christin asserted that all the fittings and finishes of the apartments would be itemized in the purchase agreements. Most developers provided apartments fitted with a carpet, kitchen set and closets, she said.

As for price, Oka said the range varies form state to state. In eastern states such as New South Wales, the price of a house is quite expensive compared to areas in western Australia. Meanwhile, tough competition in Perth has made real estate prices soar, from between A$200,000 to A$400,000.

"Each state has its own characteristics and price range, and even prices in different neighborhoods of the same city can greatly differ. For example, a house in Chatswood would have a different price from one in Bondi Beach," he said.

Buying real estate property, however, is a big decision, especially for first time buyers. Oka suggested that prospective buyers thoroughly contemplate their reasons for purchasing property before making any decision. Then, they could surf the Net and compare prices and areas to find one that suits their needs. Investors should also consult local agents on legal and financial issues.

"The first thing that prospective buyers should do is to decide whether the real estate purchase is for investment, lease, student accommodation or some other purpose. They should also know that there is a restriction that foreigners are not allowed to buy secondhand houses in Australia," Oka said.

Prospective buyers can study brochures and floor plans, and attend house showings that local agents generally offer, or even ask their relatives or children in Australia to check out the locations and types of real estate available.

"Most of the time, we can close a deal without the investors having to go to Australia at all," said Midli.

She said that in Melbourne, investors interested in buying undeveloped property would be exempt from development tax (stamp duty), which is around four percent of the sale price. The longer the period of construction, the smaller the stamp duty will be.

Once the buyers decide to purchase the property, they should have a contract drawn up at the local agent's office and transfer the down payment - 10 percent of the sale price - to a trust account under the name of a solicitor at an Australian bank. Unlike in Indonesia, an Australian property developer cannot withdraw the money until they complete the construction work. The account is thus protected by the Australian government so that buyers can withdraw their money if construction is canceled, or if it takes longer than expected.

The buyers should pay another 10 percent after construction is complete, while the remaining balance can be paid in installments over a maximum of 30 years.

Midli said that buyers who want to take out loans should have assets worth at least 30 percent of the sale price, and a recommendation letter from the developer. Assets can include vehicles, property and funds in Indonesia or overseas. The asset, however, does not function as collateral because it is the certificate of property that acts as collateral.

Since the Brady Group is a contractor, developer and property management firm, investors can choose the interior of their apartments according to their preferences. As part of property management, the Brady Group also offers a rental gap guarantee at market price, which is determined by the Real Estate Institute of Victoria.

The company provides various services, including looking for tenants, transferring rental payments and is also responsible for property maintenance. Most leased apartments require tenants to provide their own furniture and pay their rentals at least two months in advance. Usually, tenants rent apartments for at least six months.

Meanwhile, the New Zealand property market is currently seeing an increase in demand from Jakarta. Midli said the New Zealand property market recorded a strong sales volume last year. "Although it is three hours from Australia, New Zealand property has attracted many Indonesians. Its tranquil towns and wonderful scenery are considered good in providing an educational atmosphere," she said.

Prices and potential price increases are also among those aspects that make New Zealand property attractive much in demand. A two-bedroom apartment in New Zealand is only NZ$200,000, much cheaper than in Australia at A$400,000. "Property in many areas are experiencing increases in real estate price, as many Indonesians now consider Auckland to be a city of education," Midli said.