The tax amnesty program of Indonesia is yet to have an impact on Indonesia's property sector. Earlier, analysts and stakeholders expected part of the asset repatriations into Indonesia (under the government's tax amnesty program) to flow to property, either property ownership or property development projects. Although tax declarations and additional government revenue under the amnesty program were a success, the repatriation of assets that were stashed overseas has been weak. However, some stakeholders are optimistic that repatriated funds will flow to Indonesia's residential property in Q2-2017.
Keith Steven Muljadi, President Director of Sentul City (a Jakarta-based property development and management company), informed that the company's marketing sales in full-year 2016 were much weaker than initially anticipated. while Sentul City's initial marketing sales target for 2016 was set at IDR 1.5 trillion (approx. USD $113 million), it had to revise down this target to IDR 1.2 trillion in mid-2016. However, by the end of 2016 the property firm had only collected IDR 800 billion in market sales.
Muljadi said Sentul City failed to achieve its 2016 target because of the sluggishly growing overall economy of Indonesia and weak asset repatriations under the government's tax amnesty program. Although Indonesia's gross domestic product (GDP) growth accelerated to 5.02 percent (y/y) in 2016 - hence effectively ending the country's five-year economic slowdown - this acceleration was much softer than predicted by analysts, particularly due to soft economic growth in the fourth quarter.
Meanwhile, up to the end of January 2017, only IDR 141 trillion (approx. USD $10.6 billion) worth of funds were repatriated by tax amnesty participants into Indonesia. This is only 14 percent of the government's target and few expect to see an improvement in the remaining two months (the tax amnesty program ends on 31 March 2017) because in the last stage of the program the tax rates and penalty tariff are the least attractive. However, Muljadi remains optimistic that the impact of the repatriated funds will be felt later this year, either in the second or third quarter of 2017. The funds that have been repatriated are currently still stashed at onshore banks but will be injected in the real economy in the next couple of months. Other developments that can support Indonesia's property sector this year are accelerating economic growth and aggressive government-led infrastructure development.
Thomas J. Angfendy, General Director at Metropolitan Land (a Jakarta-based property investment and development company), said the impact of the amnesty program on the property sector has so far been limited to the more luxurious projects. He detected an increase in sales in the higher-middle class and elite segments (residential property) but not in the lower segments.
Meanwhile, commercial real estate services provider Jones Lang LaSalle stated that sales in the vertical housing market of Indonesia worsened in Q4-2016 reflected by subdued apartment sales. Therefore, Jones Lang LaSalle is yet to see the impact of Indonesia's tax amnesty program on the nation's property sector. Subdued sales in Q4-2016 were not attributed to weak purchasing power but rather to negative market sentiments. In the last quarter of 2016 religious and ethnic tensions heightened considerable due to Ahok's blasphemy case. Meanwhile, from abroad, concerns about Donald Trump winning the US 2016 presidential election triggered capital outflows from emerging markets, including Indonesia.
James Taylor, Head of Research at Jones Lang LaSalle, is optimistic that 2017 will be a better year for Indonesia's residential property market, supported by a stable rupiah exchange rate, improving macroeconomic fundamentals, and rising demand for property.