Starting from 1 September 2013, the minimum down payment for the purchase of a second house or apartment (bigger than 70 m²) in Indonesia will be raised to 40 percent. Indonesia's central bank (Bank Indonesia) implements this new rule to avoid a possible credit bubble in Indonesia's property sector. The country's property sector has been booming in recent years, giving rise to many new property projects, soaring profits for property companies (as well as impressive stock performance) and significantly rising property prices.
The property boom is not a new phenomenon. In June 2012, Bank Indonesia already raised the minimum down payment on housing loans to 30 percent (moreover the recently raised benchmark interest rate to 6.50 percent will also increase borrowing costs). However, despite the measure, property companies continued to post impressive sales figures, while credit loans continued to grow. For example, in June 2012, outstanding loans for apartment purchases grew to IDR 6.56 trillion (USD $659.3 million) but in May 2013 it stood at IDR 11.42 trillion (USD $1.15 billion).
Bank Indonesia detected speculation in the property market as there are known cases that people take up to 10 mortgages to finance property purchases. For many Indonesians and foreigners, property is a lucrative investment as prices rise quickly. However, various analysts assert that most newly sold property is bought by Indonesian end-users. In fact, there is a backlog of 13.6 million apartment units. As demand and purchasing power of the (upper) middle class and elite is rising, the new Bank Indonesia rules are therefore expected to have limited impact. Moreover, about two-thirds of apartment purchases are made through cash installments.
Up to 2016, about 37,800 new apartments will be build. Around 70 percent of these apartments have already been sold. A report from Mandiri Sekuritas indicates that loans for apartments are growing about 80 percent per year, while property lending increases at about 22 percent per year.
The new rules, which aim to curb growth of Indonesia's property sector can have a negative influence on the country's ceramics and cement industries as both are highly dependent on the performance of the property sector. From both industries voices are heard that the new rules may bring an impact on sales figures in 2013 and 2014.