Before purchasing property or a vacation rental in Indonesia anywhere, it’s important to know the health of the market where you plan to buy. Nobody wants to buy property only to have the property values peak and then decline.
According to many investors, property is still undervalued. Indonesia has a huge consumer market and an ever growing middle class, which has resulted in a great shortage of property.
But the market has also seen stagnation of property values in recent years due to a decrease demand from Chinese investors and the introduction of a 20% luxury for properties worth more than USD 750,000.
What to Expect from Jakarta’s Market in 2019
The expected price increase, according to Colliers, for apartments in Jakarta will remain at 4.5% to 5.5%. Price increases in Surabaya will remain at 5% to 6%.
Indonesia has seen steady economic growth
between 2015 – 2017 the GDP per capita increased from USD 3,330 to USD 3,840. Significantly more young and middle-class urban Indonesians will now afford to buy homes.
In recent years, several investors, such as Mitsubishi UFJ Financial Group, have invested in the financial sector and other sectors, causing an increase in consumption and investment by the growing middle class.
Mega Infrastructure Projects Planned
Indonesia has plans to heavily invest in its infrastructure, particularly in hubs like Jakarta. This includes the new MRT and LRT projects, Jakarta to Bandung High-Speed Rail, the Ring Roads, and more. The MRT and LRT projects, in particular, will revamp the property market by allowing buyers to purchase apartments and houses further away from the central areas.
Indonesia’s property prices are at the bottom
Property prices reached the bottom of the market cycle but started to show signs of recovery in 2018. From this point, it’s expected that the prices will see an upward trend.
Indonesia is the cheapest to buy property
Indonesia has the cheapest property available in Asia. Within Jakarta’s business district the price per square meter is 20% lower than Hanoi and 55% less than that of Bangkok. When compared to Singapore and Hong Kong, the price difference is significantly higher.
What else can the property market bring forward?
There are number of other pros to Indonesia’s property market that make investing in Jakarta real estate a good investment.
- The interest rate is rest steadily at 5%
- Banks offer 85% of leverage to first-time buyers to allow people to borrow more money.
- Inflation is low, about 4.5%
- The Indonesia Rupiah remains stable, allowing for good returns from property investment.
- Developers are providing more favorable loan terms, such as 60-month payment plans instead of 36 months or 42 months.
Indonesia’s Regulations to Foreign Property Ownership
Indonesia is known for having some of the most least friendliest property ownership laws in Southeast Asia. In 2016, the government went so far to pass an emergency law allowing the President to take instant action in changing the property ownership regulations, which is desperately needed of Indonesia plans to compete with its neighboring countries in the long term.
The new law was a tiny step forward but many believe that more change is needed.
Below you can find regulations included in the new law:
- according to the new investment requirements, buyers need to buy apartments with a minimum value of IDR 5 billion in Jakarta (approximately USD 328,000).
- For those buying a house the land size can be maximum 2,000 square meters
- You are only allowed buy one property
- when you own the property you need to keep your stay-permit
Unlike before, with the new law in place, you can now buy second-hand units and you can mortgage your property in a bank or local financial institution.
The Indonesian housing market slowed down in 2014 but since this has shown promising signs of growth. In areas of urban growth and development, such as Jakarta, there are plenty of opportunities to take advantage of low housing prices that will provide higher returns as the market begins to recover.
Many investors will wait until the results of the general election of 2019 but with low prices, political stability, and the completion of mega infrastructure projects there is great potential for property investment.