New properties to help boost Indonesia’s property market

The global commodity slump has affected markets all over the world. In Indonesia, the property market has seen a 26 per cent drop in value in 2015 and a whooping 49 per cent in the first 3 quarters of 2016.

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But momentum has picked up within the last quarter as a number of foreign developers are drawn to the market and recognising the potential it holds. The Indonesian government has relaxed mortgage rules and implemented tax cuts in attempts to boost market activity. Taxes on home sales have been halved and the minimum down payment on homes have been cut once again in 2016. Bank Indonesia has also reduced the benchmark interest rates.

As urbanisation in Indonesia is amplified yearly, with approximately 200,000 people moving from rural areas to the major urban cities such as Jakarta, developers are seeing the real and immediate effects of providing ready housing for a rapidly growing market of property and home seekers. Recent entries by foreign developers include China Communication Constructions Group (CCCG), Mitsubishi Corporation, Tokyu Land, Hong Kong Land and Sime Darby. The total investment monies come up to an estimated US$2.8 billion, the highest amount recorded since 2007.

mitsubishi-jakartaPhoto credit: Mitsubishi Corporation

City centre properties in Jakarta are increasingly popular as traffic conditions make it difficult for the growing workforce to travel from outlying districts. CCCG for example have their hand in the development of 4 residential projects in Jakarta alone, targeting mainly young couples and families. Mitsubishi Corporation is also jointly developing 1,000 housing and retail units in Bumi Serpong Damai. Though there may be some doubt about how the domestic market will be able to manoeuvre around the sudden increase in available properties, analysts are hopeful that property sales this year will post at least a 15 per cent growth.