As the rupiah wavers, property companies holding US dollar-denominated debt brace for potential fallout. According to Bloomberg’s report on Monday, 15 April, the spot exchange rate stood at IDR 15,848 per US dollar.
Ibrahim Assuaibi, Director of Laba Forexindo Berjangka, predicts the rupiah’s range to fluctuate between IDR 15,500 and IDR 16,100 per US dollar in the first half of 2024.
He attributes this to potential geopolitical tensions, particularly in the Middle East, during this period. Furthermore, with the Indonesian market observing the Eid al-Fitr holidays, the lack of fresh economic data exacerbates the uncertainty.
The weakening rupiah places a burden on the performance of property companies with US dollar-denominated bonds. Among them, PT Modernland Realty Tbk (MDLN), PT Agung Podomoro Land Tbk (APLN), PT Alam Sutera Realty Tbk (ASRI), and PT Bumi Serpong Damai Tbk (BSDE) are notable.
MDLN, for instance, carries interest expenses in US dollars equivalent to IDR 24.98 billion, with additional miscellaneous costs of IDR 5.07 billion. Their US dollar-denominated bond debt will be recorded at IDR 5.75 trillion by the end of 2023. ASRI holds long-term bond debt, amounting to IDR 3.49 trillion when converted to rupiah. APLN still owes US$ 131.96 million in senior notes.
BSDE faces the maturity of US$ 300 million in Global Prime Capital (GPC) VI senior notes on 23 January 2025.
Budi Frensidy, a Capital Market Observer from the University of Indonesia, notes that MDLN and APLN have the heaviest debt-to-cash flow ratios among the four property companies. Conversely, BSDE demonstrates relatively robust performance.
However, Frensidy warns that as long as interest rates remain high and the rupiah weak, performance will suffer, with potential relief only if interest rates decrease.
Looking beyond the property sector, companies heavily reliant on imports, such as in pharmaceuticals, paper, and tyre industries, also face challenges amid the rupiah’s depreciation. Frensidy singles out PT Indofood CBP Sukses Makmur Tbk (ICBP) as an example of a company with substantial US dollar debt likely to see its performance erode.
Nevertheless, certain sectors benefit from the rupiah’s depreciation, notably energy and commodities, including gold, which sees a surge in prices. Praska Putrantyo, CEO of Edvisor.id identifies ASRI and BSDE as attractive propositions in the property sector due to their low debt ratios and appealing stock valuations. He recommends accumulating stocks in ASRI and BSDE with respective price targets ranging from Rp 166 to Rp 174 per share and Rp 1,040 to Rp 1,085 per share.
The Indonesian property market 2024 for expat: Bali and Jakarta to catch more interest
On the other hand, Indonesia’s property market among expatriates is seeing a gradual increase in early 2024. According to CNBC, Indonesia has attracted significant interest from international property investors in Q3.
This interest was concentrated in the residential sector, particularly houses priced between IDR 1 billion and IDR 3 billion, which saw a significant surge of 34.7%. Houses in the IDR 400 million range also experienced a healthy increase of 25.7%. Following the two, the luxury market (houses above IDR 5 billion) is also showing positive signs of growth.
Furthermore, expat investors looking to capitalize on this promising market can easily benefit from the services of trusted property consultants in Indonesia. These professionals can help navigate the more seamless process of investing property in Indonesia, starting from the legalities of foreign ownership, identifying suitable investment opportunities, and ensuring a smooth transaction process.
Social Expat proudly recommends our partner, Lets Move Group, as one of a few trusted and reliable local property agents so expat investors can make informed decisions and gain valuable insights into the local market dynamics.
If you are interested in understanding more about the Indonesian property landscape, kindly contact Lets Move Group’s professional consultants or visit Lets Move Group’s official website here.
