Indonesia Real Estate Market
The Indonesian Property Market is set for rapid growth
There are many lessons to be learned from the COVID-19 pandemic crisis. One is that it has severely shocked the residential real estate sector, and this could have important implications for macro-financial stability because of the large size of the sector.
1.According to the Housing Demand Forecast 2017 released by the Indonesia Property Information Centre (IPIC) , Indonesia's housing market demand is expected to increase by 2.8 percent.
Affordable options lead the way for the future of Indonesian Real Estate
Developers of affordable rental apartment buildings are shifting their focus to lower-priced segments of the market to cater to the millions of people who cannot afford single family homes.
This has also intensified the competition amongst these products, and is expected to continue in the near future.
Indonesian Real Estate Market Forecast
Indonesia is set to become a new economic powerhouse in Southeast Asia, with more individuals and corporations from overseas looking to invest in this dynamic market.
More and more foreigners, especially Chinese buyers, are buying real estate in Indonesia. You'll discover what's driving this trend and how Indonesian real estate prices are rising.
The latest Residential Property Price Survey conducted by Bank Indonesia showed moderate residential property price growth in the third quarter of 2021, as confirmed by a
2.41% (yoy) increase in the Residential Property Price Index (RPPI). The RPPI had been growing at a faster pace in the second quarter, at 3.23% (yoy).
Government Incentives is Expected to Boost the Housing Starts Real Estate Trend in the Country
As per estimates, the residential construction starts in Indonesia decreased by nearly 10% Y-o-Y in 2021, compared to 2020.
In 2020 residential construction saw an even sharper drop in housing starts compared to 2019. The biggest decline was seen in small houses, followed by medium and large houses.
The Indonesian government recently lowered the key interest rate and has eased restrictions on individual foreign ownership. It's encouraging that it's increased the loan-to-value ratio for local and foreign investment in property.
For every purchase of an apartment above the IDR 2.1 million threshold, the Indonesian government will increase the rate of value-added tax by 20%.
Government policy to support residential construction in the country should result in more property sales, in the forecast period.
Government Infrastructure projects leads to Growth in the Indonesian Real Estate Sector
For example, new toll roads connecting residential areas with the Jakarta Outer Ring Road (JORR) have had a big impact.
Tangerang, Greater Jakarta’s northern region, has been the biggest beneficiary of the new infrastructure.
This region’s roads are interconnecting three toll roads that will provide commuters with a smoother, less congested ride when traveling between the area's cities.
Untapped opportunities in Indonesia's real estate market are creating demand in the country's economy.
Indonesia's prices are at their highest in the capital city, Jakarta. Jakarta is the economic center of Indonesia.
The average land price in industrial areas in Jakarta reached almost 6 million Indonesian rupiah per square meter, while the landed residential homes’ prices were almost three times higher, reaching almost 15 million Indonesian rupiah per square meter.
Indonesia has agreed to move its capital city to East Kalimantan. Jakarta is Indonesia's capital, but the country's president, Joko Widodo, plans to relocate the capital to East Kalimantan, which is located at the northern end of the island of Borneo.
The property market in Borneo Island, where East Kalimantan is located, has since then become more attractive than before.
There are a few sectors that have been little affected by the COVID-19 crisis. Real estate is one of them.
It is the only sector of the economy that is expected to see growth in 2020.
Indonesia’s biggest real estate companies such as Lippo Group, Bumi Serpong Group, and Ciputra Group are still growing their business in the residential housing and apartment sectors.
This indicates that demand for these properties in Indonesia is still high, and there is still potential to increase the demand.
But for now, the property market is not over yet. Its property supplies are still relatively low. There is still much room for further developments to fulfill the demand for residential and commercial real estate.
The Indonesian government is working to reduce the country's housing backlog by expanding the Real Estate market for locals and foreigners.
They’re reducing the housing financing liquidity facility's interest rate and increasing the housing financing liquidity facility’s loan-to-value ratio.
The government also increased the threshold for luxury property taxes. To encourage home buying in Indonesia, they raised the tax threshold.
After the COVID-19 crisis hit the country, home rental rates have been increasing. Especially for big cities, especially Jakarta.
Indonesia has restrictions on foreign real estate property ownership, and only citizens can own property and land in the country.
There are many different ways to purchase real estate, from direct purchase to a strata title agreement.
Legal entities such as limited liability companies allow foreign individuals and businesses to build and use the properties in Indonesia for up to 60 years.