Indonesia Property Market Outlook 2017


Indonesia Property Market Outlook 2017

 What can you expect if you’re planning to sell real estate in Indonesia fast? According to JLL’s report, “Globalisation and Competition: The New World of Cities”, the Indonesian economy in general (and Jakarta in particular) have been making a strong progress and has been attracting a great deal of real estate investment.

The report says, “The city’s middle class continues to expand, which carries big implications for the growth of the retail sector, and the demand and supply of different kinds of space.”  

Jakarta has an edge because of low costs and high consumer demand. Many multinational companies find the city appealing as it gives them a base to expand their business in Southeast Asia.

Economic reforms such as those promised by President Widodo have also helped Indonesia’s property market. It has certainly led to a number of foreign investors to look at Indonesia seriously.

The Indonesian government has done its bit to make it easier for foreigners to buy residential property in the country. A number of laws have been brought forth to make home ownership less restrictive for foreigners.

However, these laws only apply to luxury homes that cost over 10 billion rupiah or $723,000.  There is certainly a huge demand for luxury homes in Indonesia. The government has introduced a new super luxury tax of 5% to take advantage of this.

James Taylor, JLL’s Head of Research in Indonesia says, “It will be a great move if it happens. It will open up real estate investment, allow local property companies to access the equities market, increase cash flows, enable foreign investors to enter the market without having to navigate complex ownership rights and offer good liquidity in the market.”

Taylor adds that such a move would increase transparency in Indonesia: “Indonesia can be an opaque place, but this will help as REITs will make it easier to get information on rentals and yields.”

Standard & Poor’s Ratings Services has come out with its own report, titled, “Indonesian Property Development Through the Lens Of China’s Experience,” where it has compared the property market in Indonesia with that of China’s.

According to the report, the housing market in Indonesia may go through the same cycle as China, which has entered a mature phase right now, as sales have bottomed out and competition is higher than ever.  This has led to a rapid consolidation of the market, which is why the property market in China is heading towards a period of stabilization.

Standard and Poor’s expect something similar in Indonesia. According to the Standard & Poor’s credit analyst Kah Ling Chan, although the housing market in Indonesia is a lot smaller than that of China’s, “a comparison of the sectors in these countries is meaningful for investors.”

 “We expect Indonesian developers to largely go through the same credit trends as the cycle expands and matures,” Mr. Chan adds. Indonesia is at a high-growth stage right now, with rising household incomes and a fast growing middle class. So there’s expected to be a lot of demand for properties for sale in Indonesia for now and into the foreseeable future.

 




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