Indonesia's Residential Property Sector Still in Slowdown-Mode
The latest survey of Indonesia's central bank (Bank Indonesia) shows that price growth and sales growth in Indonesia's residential property sector continued to slow in the fourth quarter of 2015. The Q4-2015 residential property price index rose by a mere 0.73 percent (quarter-to-quarter) from a growth pace of 0.99 percent (q/q) in the preceding quarter. Indonesian property developers expect that this slowdown will continue at least throughout the first half of 2016.
Bank Indonesia's residential property price survey showed that higher prices of building materials and higher wages are the main factors that explain higher residential property prices in the last quarter of 2015.
The lowest growth in residential property prices occurred in Pontianak (West Kalimantan), while the highest growth occurred in Medan (North Sumatra).
Slowing growth of residential property prices in Indonesia is caused by the country's overall economic slowdown. In 2015 the nation's gross domestic product (GDP) growth slowed to a six-year low of 4.79 percent (y/y). The Bank Indonesia survey indicated that this was a crucial factor that cooled demand in the property sector.
Eddy Ganefo, Chairman of the Association of Housing and Settlement Development in Indonesia (APERSI), said the country's property developers do not expect a rebound in the first half of 2016. They agree with the government's decision to unveil a series of stimulus packages but expect it will require time until the second half before the fruits of these packages can be enjoyed. These packages do not directly target the country's property sector. However, as they will boost people's purchasing power (if implemented efficiently and effectively), the property sector is also to feel the positive impact.
Further Reading: Analysis & Overview of Indonesia's Residential Property Sector
Ganefo added that the two most important strategies to influence the nation's property sector in a positive way are the safeguarding of a stable rupiah currency and, secondly, the implementation of a lower benchmark interest rate (currently at 7.25 percent) as lower borrowing costs will boost the property sector.
Economic Stimulus Packages of the Indonesian Government:
| Package | Unveiled | Main Points |
| 1st | 9 September 2015 |
• Boost industrial competitiveness through deregulation • Curtail red tape • Enhance law enforcement & business certainty |
| 2nd | 30 September 2015 |
• Interest rate tax cuts for exporters • Speed up investment licensing for investment in industrial estates • Relaxation import taxes on capital goods in industrial estates & aviation |
| 3rd | 7 October 2015 |
• Cut energy tariffs for labor-intensive industries |
| 4th | 15 October 2015 |
• Fixed formula to determine increases in labor wages • Soft micro loans for >30 small & medium, export-oriented, labor-intensive businesses |
| 5th | 22 October 2015 |
• Tax incentive for asset revaluation • Scrap double taxation on real estate investment trusts • Deregulation in Islamic banking |
| 6th | 5 November 2015 |
• Tax incentives for investment in special economic zones |
| 7th | 4 December 2015 |
• Waive income tax for workers in the nation's labor-intensive industries • Free leasehold certificates for street vendors operating in 34 state-owned designated areas |
| 8th | 21 December 2015 |
• Scrap income tax for 21 categories of airplane spare parts • Incentives for the development of oil refineries by the private sector • One-map policy to harmonize the utilization of land |
| 9th | 27 January 2016 |
• Single billing system for port services conducted by SOEs • Integrate National Single Window system with 'inaportnet' system • Mandatory use of Indonesian rupiah for payments related to transportation activities • Remove price difference between private commercial and state postal services |