Indonesia's residential property market has shown robust growth in recent years as demand from the country's rapidly expanding middle class for mid-level and luxury property increased steadily amid a low interest rate environment and robust national economic growth. Demand for property is also backed by high consumer confidence as a recent Nielsen survey shows that Indonesians are among the world's most confident consumers. Indonesians' consumer confidence was at a four-year high in the fourth quarter of 2013.
This confidence is generated by robust macroeconomic growth in recent years. In the last decade, Indonesia has been posting gross domestic product
(GDP) growth rates averaging around six percent per year and giving
rise to a rapidly expanding middle class segment. In 2012, the country's
middle class numbered around 75 million people (of a total population of 240 million,
making Indonesia the world's fourth most populous country). Research
firms the Boston Consulting Group (BCG) and McKinsey expect that this
middle class will grow to between 130 and 140 million people by the
period 2020-2030.
With more money to spend, people's lifestyles change accordingly. In terms of property it means that Indonesians will invest in property, either to improve one's own life (by living in a nicer house or at a better location), or by renting out or selling property with profit at a later stage. Consumer confidence in Indonesia is also backed by people's positive attitude toward the upcoming legislative and presidential elections of 2014 (scheduled for April and July). Historically, domestic consumption tends to increase in election years in Southeast Asia's largest economy.
Compared to two decades ago, an
important shift has occurred in the larger cities of Indonesia. The
skyline of big cities such as Jakarta or Surabaya is more and more
dominated by high-rise buildings, either offices or apartments. Central
districts in cities have seen much property development as - amid
economic growth - more and more businesses (both foreign and domestic)
needed office space, while there has also been a trend of middle class
people enjoying living in the central parts of the bigger cities as it
reduces travel time to their offices.
Also property development in suburbs and secondary cities has been booming, both from a demand and supply side. These projects include houses, apartments and condominiums, mixed-use developments, shophouses, malls in the rapidly growing suburbs of the Greater Jakarta region (including Jakarta, Bogor, Depok, Tangerang and Bekasi).
If you are expatriates looking for the apartment units available for sale or rent in South Jakarta area, either for you alone or for you and your family, just click the links below to figure out!
- Ambassade Apartment at Kuningan
Prospective secondary cities include Bandung, Surabaya, Yogyakarta and Semarang (all on Java, Indonesia's most populous island). Outside Java, large-scale property development is seen in cities such as Medan and Palembang (Sumatra), Balikpapan and Pontianak (Kalimantan), Makassar (Sulawesi) and on Bali as well as Lombok. As a logical side effect of the property boom, Indonesia's land and property prices have increased considerably in recent years.
Also property development in suburbs and secondary cities has been booming, both from a demand and supply side. These projects include houses, apartments and condominiums, mixed-use developments, shophouses, malls in the rapidly growing suburbs of the Greater Jakarta region (including Jakarta, Bogor, Depok, Tangerang and Bekasi).
If you are expatriates looking for the apartment units available for sale or rent in South Jakarta area, either for you alone or for you and your family, just click the links below to figure out!
- Ambassade Apartment at Kuningan
Prospective secondary cities include Bandung, Surabaya, Yogyakarta and Semarang (all on Java, Indonesia's most populous island). Outside Java, large-scale property development is seen in cities such as Medan and Palembang (Sumatra), Balikpapan and Pontianak (Kalimantan), Makassar (Sulawesi) and on Bali as well as Lombok. As a logical side effect of the property boom, Indonesia's land and property prices have increased considerably in recent years.
In the Greater Jakarta region, demand
for new residential property (middle-up and high-end housing projects)
is at between 100,000 and 200,000 units per year, thus exceeding supply.
Luke Rowe, Senior Advisor at Jones Lang LaSalle Indonesia, sees a very
buoyant market across Jakarta as in 2013 74 percent of all new property
projects were sold before construction was started. When projects are
completed, about 90 percent of the property had been sold. These rates
are much higher compared to other countries and thus indicate robust
demand. Rowe also notes that 60 percent of property purchases are made
by investors, while the remaining 40 percent are made by end-users.
However, for the future, Rowe expects that the ratio of end-users will
grow.
However, growth of the property sector in Indonesia is expected to slow after the central bank (Bank Indonesia) introduced measures to curb Indonesians' demand for housing,
particularly because it detected speculative buying. In July 2013, Bank
Indonesia raised the minimum down payment requirement and curbed
mortgages for second home ownership. Moreover, higher inflation starting
from June 2013 (after the government increased prices of subsidized
fuels), in combination with an uncertain international climate (due to
the looming end of the Federal Reserve's quantitative easing program)
leading to large capital outflows from Indonesia (evidenced by a sharply
depreciating rupiah exchange rate
in 2013), made Bank Indonesia decide to raise its benchmark interest
rate (BI rate) gradually from 5.75 percent in June 2013 to 7.50 percent
in November 2013.
In fact, there is still a chance that the central bank will raise its BI rate this quarter despite generally improving economic fundamentals (such as the easing current account deficit, easing inflation and an appreciating rupiah). Amid this less rosy economic environment, there have been reports that property developers needed to postpone projects as well as a reported decline in mortgage disbursement by financial institutions.
In fact, there is still a chance that the central bank will raise its BI rate this quarter despite generally improving economic fundamentals (such as the easing current account deficit, easing inflation and an appreciating rupiah). Amid this less rosy economic environment, there have been reports that property developers needed to postpone projects as well as a reported decline in mortgage disbursement by financial institutions.
Bank Indonesia also prohibits lending to
developers for land acquisition. For the smaller developers, this forms
a (financing) problem and therefore Indonesia's property development
continues to be dominated by the large developers, such as Lippo Karawaci, Agung Podomoro, Sinar Mas Land, Kawasan Industri Jababeka, Ciputra Development, Summarecon Agung and Pakuwon Jati. Indonesia Investments.
Editorial: +Premium House
Editorial: +Premium House
