Are millennials interested in vertical housing?

Millennial interest in living in vertical housing is starting to grow, said Jakarta Property Institute (JPI) Program Director Mulya Amri. JPI conducted a survey from October 2019 to November 2019 to 300 respondents. As a result, 54 percent are interested in living in an apartment in the city center of Jakarta. "Unlike the previous generation, it turns out that the millennial generation is more ready to live in vertical housing," Mulya said in the presentation "Is Millennial Interest in Vertical Housing?" Thursday, March 5, 2020.

The survey was conducted through online questionnaires and face-to-face interviews. Respondents reside in DKI Jakarta and outside Jakarta (Bodetabek) aged 19-39 years.

Based on the survey results, there are three factors that determine respondents' desire to live in an apartment in downtown Jakarta: location of residence, transportation costs and travel time. The results of the correlation analysis prove that the farther the place of residence is from the location of work, the more respondents want to live in an apartment.

The same applies to transportation costs. The average transportation cost for respondents is 5-10 percent of their income, which ranges from Rp 5-10 million per month. "The more expensive the transportation cost, the more they want to live in an apartment," said Mulya.

For one trip from home to work, 36.7 percent of respondents spend 31-60 minutes. Even 24 percent of respondents can spend more than 60 minutes on the trip. The length of travel time also further encourages respondents' desire to live in an apartment.

Affordable apartments are minimal

Still based on the survey results, 82 percent of respondents have limited ability to pay installments at Rp 3 million. To be more precise, 54 percent want to pay Rp 1-3 million and 28 percent are able to pay below one million per month.

Unfortunately, most vertical housing available in DKI Jakarta, whether built by the government or by the private sector, cannot be paid in installments within this price range.

In comparison, private developers are trying to provide affordable apartments, for example in the Kemayoran area, pegged at Rp 380-667 million. With this selling price, the installment value is around IDR 3.8-6.6 million per month for a 15-year tenor. This is beyond the installment ability of 82 percent of millennial respondents above.

Meanwhile, the zero rupiah DP Rusunami built by the DKI Jakarta Government, namely Rusunami Klapa Village in East Jakarta, is sold for IDR 184-300 million. The installment is Rp 2.4 million per month for a 15-year tenor. "The provision of affordable housing in the city must be supported by government policies and subsidies," said Mulya.

Mulya continued, the construction of Rusunami Klapa Village needs to be increased and the location is closer to the city center. To realize this, the government can synergize with the private sector. This is because the development of affordable housing cannot be fully provided by the private sector.

Short HGB makes people hesitant to own vertical housing

Another 46 percent of respondents are not interested in living in vertical housing. The reason is that apart from expensive installments, they also prefer to live in landed houses. Another reason why respondents are reluctant to live in apartments was explored from the interview results. As a result, the time limit for ownership of the Building Rights Title (HGB) certificate also makes millennials reluctant to live in apartments.

For vertical housing, the certificate that residents get is an HGB certificate that has a period of ownership. As for landed houses, the certificate obtained is a Certificate of Ownership (SHM) without a period of ownership.

According to Law No. 5/1960 on the Basic Regulation of Agrarian Principles, the maximum period of HGB is 30 years. HGB certificates can be extended for a maximum period of 20 years. Respondents' perception of the 30-year validity period of HGB certificates is that it is too short. "It can only be inherited by families for one generation," said Mulya.

In comparison, Singapore's State Lands Act stipulates an apartment ownership period of 99 years. According to Mulya, this longer period of time allows ownership to be passed down for three or four generations.

Mulya suggested that the government could adopt Singapore's policy. The maximum HGB period stipulated in Law Number 5/1960 is currently extended to or close to 99 years. This policy will attract people to live in vertical housing. Moreover, land in Jakarta is also increasingly limited.

Regarding land limitations, Mulya said the government can build low-cost vertical housing on government-owned land that is not optimally utilized. For example, the construction of flats on the market buildings of Regional-Owned Enterprises (BUMD). "In other countries, a lot of housing is built on the market," he said. This can overcome the high price of land so that the selling price of apartments can be more affordable. Millennials can also return to live in Jakarta. Not only that, the effect of urban sprawl (unstructured urban development) will be reduced.

Jakarta Property Institute (JPI)

Established in 2015, the modern property industry. JPI conducts research, recommends innovations and management practices Jakarta Property Institute is a non-profit organization whose mission is to help Jakarta become a more livable city and encourage best urban practices from successful countries, as well as facilitate stakeholder dialog to address problems in Jakarta that affect economic growth and urban living standards. JPI members are property industry players who are ready to make an optimal contribution to realizing a sustainable Jakarta.

For more information, visit www.jpi.or.id or contact Linda (+6281283951900).