Business
In Indonesia Today
OVERVIEW OF THE BOOMING RESIDENTIAL PROPERTY SECTOR
OF INDONESIA
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). 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.
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.
Sumber : http://www.indonesia-investments.com/doing-business/business-columns/overview-of-the-booming-residential-property-sector-of-indonesia/item1746
Nama : Rudy
Gustian
Npm :
16210269
Kelas : 4EA19
Tugas Bahasa Inggris Bisnis 2
