Following Jakarta's stellar performance in our latest Prime Global Cities Index, Fakky Hidayat, Senior Associate Director of Research in Knight Frank's Jakarta office explains why prime property prices have risen by so much

What impact did the global economic downturn have on Jakarta's prime residential market and how has it performed since?

The 2008/09 global economic downturn had a significant impact on Jakarta's prime residential market in terms of transaction volumes (not on the affordability issue). Many wealthy local buyers adopted  a wait-and-see approach while others shifted their investment to other portfolios or looked for bargains or distressed assets in the Asia Pacific region.

The prime residential market was hit first by the slowdown as wealthy buyers immediately pulled out from investing in the local luxury property market. Many prime residential projects were put on-hold and secondary luxury residential properties experienced a sharp decline in sales transactions.

However, between late 2009 and early 2010, Jakarta's prime residential market started to improve gradually and many of the delayed luxury projects began entering the market in line with the improving national economy. From mid-2010 until now, the luxury market has performed quite well showing a remarkable jump in demand and prices rising by an average of between 5% and 20%.

Which of Jakarta's districts are considered to be the most desirable and why?

For luxury condominiums, the CBD area is still considered by wealthy individuals as the most desirable due to its prime location and its proximity to business activities and amenities. Meanwhile, for luxury landed houses, Menteng and Pondok Indah/Kemang are still considered the most desirable as they have long been known as the most expensive areas for prominent residential estates in Jakarta.

What are the key considerations for prime property buyers seeking a luxury property in Jakarta? Which property types are the most popular?

The key considerations include a strategic prime location, private/exclusive access, and quality amenities.

In Jakarta, condominiums and landed houses are still the most popular. Wealthy Indonesian buyers still choose luxury landed houses for their primary houses and purchase luxury condominiums for their investment option.

What proportion of Jakarta's prime residential market is new-build and second hand?

80% second hand vs. 20% new-build

How important are overseas buyers to the prime Jakarta market and where do the majority of overseas buyers come from?

Currently there are restrictions preventing foreigners from purchasing properties in Indonesia. Foreigners are only allowed to own properties under Right to Use or Hak Pakai limited to 25 years, but can be renewed. However, should the government ease the property rights on foreign ownership, the impact of overseas buyers would be quite significant. In some cases, there are foreign buyers who use local nominees in order to buy properties with freehold titles.

 What is the highest price per sq m achieved in Jakarta?

The highest price per sq m achieved in Jakarta was approximately Rp30m to Rp40m per sqm (£2,100-£2,800)for luxury condominiums.

Are there any emerging prime markets in the city that you think will become popular with HNWIs in the future?

South and West Jakarta districts will be transformed as emerging prime markets. Those districts have advantages of more greenery, have prominent residential areas and better accessibility to toll roads, as well as the existence of mega projects in the area.

Does Jakarta have a large prime rental market? Where does demand come from in this sector?

No, Jakarta's prime rental market is not large. Demand comes from foreign workers or expatriates with the majority of them coming from Asian and European countries.

What do you think are the main risks to the future performance of Jakarta's luxury homes?

Global crisis and political stability (safety issue) are the main issues that can affect greatly the future performance of Jakarta's luxury homes.

What is your outlook for the prime market in Jakarta in 2011 and 2012, will the volumes of prime residential sales rise or fall and what impact will this have in prices?

Our outlook will still be positive in line with the conducive national economy. We foresee that demand and prices for luxury residential property will continue to rise this year, but will slow down in 2012 due to the threat of sovereign debt in the eurozone and the financial crisis in the United States. The market is expected to resume in 2013, but it is subject to an improving global economy as a whole.