Promising property market growth for Indonesia

Despite the rapid year-to-year economic growth spurt that Indonesia is currently experiencing, it is nowhere near an equivalent performance in the residential property market. Experts agree that even though the home growth accumulated at last year’s end with a 4.5 per cent increase is not an accurate representation of overall growth occurring across the nation.

With bureaucratic roadblocks, foreign ownership constraints, expensive construction costs (up by seven to 12 per cent), and high interest rates contributing to the lack in bigger gains, has the central bank scrambling to lower those rates to battle inflation.

As urbanization peaks in areas such as Greater Jakarta (population over 28 million), depicted property increase in property prices at 5.74 per cent from over the year to Q1 2011. Yet, inflation in adjusted terms was down one per cent in the same quarter.

With the population expanding due to migration from across the country to cities, Indonesia experienced an increase in residential property growth for new construction. From data collected from 12 cities, Bank Indonesia’s research showed 67,707 units sold in 2010 from 59,498 in 2009. This 13.8 per cent increase correlates to the predicted boost in the volume of sales (especially pertaining to landed houses) in Q4.

According to Jones Lang LaSalle, in 2011 Indonesia was in the top 10 fastest increasing sectors in the economy as the economy grew from 4.6 per cent (2009) to 6.1 per cent in 2010. As a result of large domestic investments, consumption, and promising export revenues, the government can say with confidence that the economy will continue to rise by 6.6 per cent by 2011. Regardless of international economic hardship (global financial crisis beginning in 2008), the Indonesian property demand will remain strong for the medium to long term.