At the latest policy meeting (29/06) Bank Indonesia decided to relax the loan-to-value (LTV) and financing-to-value (FTV) ratios in the country's property sector (effective per 1 August 2018). By lowering down payment obligations for the consumer, the central bank aims to make it more attractive for consumers to purchase property using House Ownership Credit (Kredit Pemilikan Rumah, KPR), hence boosting overall credit growth as well as Indonesia's macroeconomic growth.

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Dynamic Credit, a Netherlands-based innovative asset management and direct lending firm, is set to become a new player in Indonesia's mortgage industry. Through local subsidiary Dynamic Credit Asia it will sell mortgages to Indonesian consumers using funds from local institutional investors. Tonko Gast, CEO at Dynamic Credit, said Indonesia's rapidly growing middle class leads to a rising pool of retirement and insurance funds. However, the availability of fixed-income investments are limited in Southeast Asia's largest economy.

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More and more signs point toward a strengthening property sector in Indonesia. In the third quarter of 2016 the property sector has seen more activity, a trend that is expected to continue into the fourth quarter and in 2017. Stanley Ang, Chief Marketing Officer at urban development company Lippo Cikarang, said this development is partly supported by the government's tax amnesty program and the lower interest rate environment in Indonesia as well as Bank Indonesia's decision to ease the loan-to-value (LTV) ratio.

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With continued economic growth in Indonesia, thus giving rise to higher per capita GDP, the property market is still expanding rapidly, particularly in the bigger cities such as Jakarta (the political and economic center of Indonesia). By 2015, 46 new property projects will add nearly 25,000 new apartments in Jakarta (‘strata title’, a term that refers to the multi-level apartment blocks and horizontal subdivisions with shared areas) with a combined value of about IDR 23 trillion (almost USD $2 billion).

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The Residential Property Price Survey still indicates slowing growth of Indonesian residential property prices (in the primary market) in the first quarter of 2014. The Residential Property Price Index grew 1.45 percent (quarter to quarter) in the first quarter of 2014 or 7.92 percent year-on-year, lower than the growth that was recorded in the previous quarter of 1.77 percent (qtq) or 11.51 percent (yoy). The slowdown occurred in all types of homes, but in particular the medium and large homes segment.

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Indonesian listed financial institution Bank Tabungan Negara should benefit from the government's Housing Loan Liquidity Facility (in Indonesian: Fasilitas Likuiditas Pembiayaan Perumahan, or FLPP), a government-subsidized mortgage program for those low-income citizens who have never bought a house before. This scheme should boost House Ownership Credit (Kredit Pemilikan Rumah, or KPR) in Southeast Asia's largest economy. Good news for Bank Tabungan Negara, which is the market leader in Indonesia's mortgage loans sector.

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Soon it will be made easier to buy property in Indonesia as the country’s central bank (Bank Indonesia) plans to ease down payment (DP) requirements for mortgages. Today (22/05), Bank Indonesia Governor Agus Martowardojo told reporters that the DP obligation for first-home buyers will be lowered from 30 percent to 20 percent of the property’s value. This relaxation should have a positive effect on the performance of Indonesia’s financial institutions and property developers as demand for loans and property is assumed to grow.

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