JAKARTA: The demand for residential property slipped by about 70 percent in the second quarter partly because of the country’s economic slowdown and uncertainties over tax regulations, a property consultant has revealed.
Jones Lang Lasalle’s (JLL) second quarter report showed that strata condominium sales in Greater Jakarta fell by 68 percent to 1,400 units during the April to June period, a significant decrease compared with the around 4,400 units sold in the previous quarter.
The total demand in the first half of 2015 plunged by 16 percent compared with the same period last year, the report showed.
JLL’s head advisor, Vivin Harsanto, said in a media briefing on Wednesday that all property sectors experienced a slowdown in the second quarter as a result of the country’s slowing economy, the rupiah depreciation and competition between available supplies.
Uncertainties over the tax regulation on the sales of residential properties had also contributed to the property market slump, she said.
Vivin, however, said that the residential property sector had experienced the most severe decline compared with other sectors and the pressure from the government’s plan to lower the threshold for property taxes made potential buyers hesitate to purchase properties and developers to expand.
“They [investors] have the money; it’s not just about purchasing power, but more about their unwillingness to buy amid regulation uncertainties. They were wondering whether they would be subject to a 20 percent tax if they bought their property as at first it was said the threshold would be lowered from Rp 10 trillion to Rp 2 trillion and later to Rp 5 trillion,” she explained.
Vivin said many developers had also put their expansion plans on hold because of lower demand.
The government recently lowered the threshold for properties subject to a 5 percent income tax, from Rp 10 trillion to Rp 5 trillion. The government, however, previously mulled over lowering the threshold to Rp 2 billion, which generated opposition from businesspeople who argued that the sum of money could buy no properties in Greater Jakarta.
The government also signed in May a regulation for a 20 percent luxury tax that will be imposed on apartments that have more than 150 square meters in area, or on landed houses with more than 350 square meters.
The luxury tax was initially designed to come into effect in June, before being delayed as the government decided to postpone it on the back of a plan to expand foreign ownership rights in the country.
Vivin said that the property consultant expected greater demand to come in the third and fourth quarters. However, she added that it would be difficult for the quarterly demands to be able to reach the same level as they were in the first quarter of the year.
“With the regulations becoming clear, we hope demand will pick up in the coming months. We previously predicted that sales would reach 12,000 units this year, but I think it might be lower than that given our current situation,” she added.
Indonesian Employers Association (Apindo) vice chairman Suryadi Sasmita, who is also a member of the Tax Revenues Optimization Team (TOPP) said in the briefing that the lowered threshold also provided taxpayers with the opportunity to request a tax exemption, a stipulation that was absent from the previous regulation.
“A businessman who sees losses in his business or an employee who has already paid income tax through his office can actually benefit from this regulation as they can apply for tax exemption,” Suryadi said.
“This is something we have to clarify and the public should know this fact as it is actually not a negative that leads to a further declining slowdown in demand.”
