In a bid to boost economic activity in Indonesia, the central bank (Bank Indonesia) revised several regulations involving down payments for the purchase of cars and motorcycles as well as the maximum loan-to-value (LTV) ratios for first or more home purchases by Indonesian citizens. Yati Kurniati, Director of Bank Indonesia’s Macroprudential Department, said that the central bank implemented the looser monetary policy in the property and automotive sectors in an effort to boost credit growth, hence boosting the whole economy.
Effective from 18 June 2015, Indonesian consumers who use credit to purchase a passenger car need to pay a minimum down payment of 25 percent, from 30 percent previously. The minimum down payment for commercial vehicles remains 20 percent. Meanwhile, the minimum down payment for the purchase of a motorcycle was reduced to 20 percent, from 25 percent previously.
Car and motorcycle sales (as well as property) are important indicators to measure people’s purchasing power, consumer confidence and more generally provide key information on the condition of the economy. Based on the latest data from the Indonesian Automotive Manufacturers Association (Gaikindo), Indonesian car sales declined 17 percent (year-on-year) to 443,328 units in the first five months of 2015. Meanwhile, the latest data from the Indonesian Motorcycle Manufacturers Association (AISI) state that Indonesia’s motorcycle sales have fallen 23 percent (year-on-year) to 2.7 million units in the first five months of 2015. These weak figures are due to Indonesia’s slowing economic growth, the weak rupiah, low commodity prices, high domestic interest rates, and high inflation.
Also per 18 June 2015, the percentage of a home price that a buyer can borrow from a financial institution was raised (or, in other words, the down payment was lowered). Bank Indonesia announced that the maximum loan-to-value (LTV) ratio for the purchase of a first home has been raised to 80 percent from 70 percent previously, while for second home purchases the maximum LTV ratio was raised to 70 percent, from 60 percent previously. Lastly, for third homes the new ratio is 60 percent, from 50 percent previously.