Under the government's tax amnesty program (which ran between July 2016 and 31 March 2017) Indonesian citizens were offered the opportunity to "come clean" regarding their unsettled tax obligations by declaring (and - if wanted - repatriating) their secretly stored assets (either stored abroad or in Indonesia). Initially it was assumed that asset repatriations into Indonesia would boost the nation's property sector as many participants of the amnesty program could be attracted to invest their money in property (an investment choice that tends to show good gains over time).

Read more: Tax Amnesty Program Indonesia Ended, What Are the Results?

But while Susanto Kiswandono (Director of the MSH Group) says there is yet to emerge a positive effect of the tax amnesty program on the nation's property sector, Michael Widjaja (CEO at Sinar Mas Land) says he already detects rising property sales (both residential and commercial property) since the start of 2017. Widjaja's company saw a 30 percent year-on-year (y/y) growth in the first quarter of 2017. This growth is (partly) attributed to the government's tax amnesty program.

Still, it is assumed that most repatriated funds of the tax amnesty program participants is currently still stored on onshore deposit accounts (data from Indonesia's Finance Ministry support this assumption). It could be the case that participants want to wait and see first for the results of the 2017 Jakarta gubernatorial election as well as the blasphemy trial of Jakarta Governor Ahok. These two cases could destabilize conditions in Indonesia's capital city of Jakarta.

In terms of asset repatriations, Indonesia's tax amnesty program was actually very disappointing. Only IDR 147.0 trillion (approx. USD $11 billion) worth of assets were repatriated into the specific investment instruments that were prepared by Indonesian authorities (while the government's target was set at IDR 1,000.0 trillion). Singapore accounted for the largest part of declared and repatriated funds by Indonesians under the tax amnesty program.

Joshua Pardede, Economist at Permata Bank, sees plenty of potential for Indonesia's property sector in the years ahead with demand from the lower to middle class particularly high. Amid the accelerating trend of Indonesia's economic growth (implying recovering purchasing power) property development for the lower to middle class segment is expected to display most activity.

Read more: Analysis of Indonesia's Property Sector

In 2016 Indonesia's property sector cooled further reflected by generally falling property prices. Although prices fell modestly, it makes consumers hesitant to purchase property (this is in contrast to the case of rapidly rising property prices that encourage consumers to buy now because prices will be higher tomorrow). However, Jakarta is the exception because a big slowdown on the supply-side managed to push prices higher.