Indonesia Property Industry Report - 2014

September 23, 2014

This report profiles Indonesia’s property industry, covering market data and trends through the first half of 2014. The report also highlights key leading players in the sector including Lippo Karawaci Tbk (Lippo), Bumi Serpong Damai Tbk (BSD) and Ciputra Development Tbk (Ciputra).

Indonesia’s property industry has witnessed consistent growth in recent years. The country’s positive economic climate in tandem with a growing middle-class have boosted domestic demand and increased developers’ confidence to continuously launch property projects in Indonesia. This has resulted in higher sales of most of the property industry’s sub-sectors as well as higher rental rates.

However, the first half of FY14 saw some deceleration in growth due to a challenging macroeconomic condition marked by high interest rates, high inflation, depreciating currency and low GDP growth. Property firms have held the government’s most recent mortgage regulation, as well as the country’s macroeconomic conditions and political uncertainty during the elections, responsible for their below average performance during the first six months of the year. The biggest pressure came from Bank Indonesia’s (BI) loan-to-value (LTV) regulation, which requires first-time home buyers to make a minimum down payment of 30% of the value of the house.

Nonetheless, due to limited land availability and persistent demand, the industry is expected to revive and occupancy levels are likely to rise in the near term. Backed by Indonesia’s developing economy, especially domestic consumption, average rental rates for offices and retail space are also expected to increase along with occupancy.

Key Points:

• During May-November 2013, the BI policy rate witnessed steep increase of 1.75% in five phases. Surge in inflation was the primary reason for the increase in BI rate. Rise in interest rate has hurt the industrial growth as well as the residential property market as the loans have become costlier.

• Indonesia has seen rapid urbanization during the last decade, with cities being the key driver of economic growth and job creation. The urban population increased from 43% in 2001 to 51% in 2012. As a result, the percentage of households residing in their own houses has declined gradually.

• The Asia-Pacific region saw dynamic annual growth in the average house price index for Q1/2014 averaging 6.6% on a y/y basis. Australia, Taiwan and China recorded the strongest annual price growth in their property markets. Meanwhile, Indonesia recorded a y/y growth of 9.1%.

• After a gradual appreciation during 2010-12, the Residential Property Price Index (14 cities) shot up in 2013 due to strong demand. However, cooling measures undertaken by BI brought down the index’s growth in 1H2014.

To view this extensive report in full including details such as —

  • Macroeconomic Analysis
  • Politics Analysis
  • Industrial sectors and trade
  • FX, Financials and Capital Markets
  • And more!

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