Indonesia Property Market in 2018 – 2019, What Will Happen?

The impact of the political year is considered a temporary factor that will affect the property market cycle in Indonesia.

Foto: Anto Erawan - (Jakarta) – Although the property market cycle has shown a turning point since Q3 2016, stakeholders—including consumers and developers—remain uncertain.

Based on a survey conducted by Indonesia Property Watch (IPW), market trends continue to show a positive movement, although it’s not significant.

“In Q1 2017, there was an increase of 5.7 percentage points higher than the first quarter of 2016 which experienced a 24% decline,” said Ali Tranghanda, CEO of IPW.

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According to Ali, market shifts occur from middle-upper segment to lower-middle segment. This also causes the sales portion in the lower-middle segment to dominate by 59.17%, followed by the middle segment (34.66%) and the upper segment (6.17%).

It should be realized that the movement in the upper-middle segment is relatively very slow, closely related to several things.

First, the property price in this segment is still indicated over value due to the very high price increase in the period 2010 – 2012, although the price has started to reach a new equilibrium, which means that very high prices have been corrected by market prices.

Second, psychological factors related to sensitive issues such as security and politics that make middle-upper consumers hesitant to invest in the property sector.

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This doubt can also be seen from a large number of funds that are stored in the banking sector as a result of the tax amnesty program.

“In fact, in one of the largest national banks, the tax amnesty fund is worth Rp57 trillion and still has not moved into real sectors, including property,” Ali revealed.

Investors prefer stock markets rather than buying property. This can be seen from the movement of stock prices that rose in the first half of 2017. So what really happens is the real estate market is relatively ready to bounce back.

2019: Political Year
In the second half of 2017, the upper-middle class market was relatively better. This can be seen with the number of developers launching new projects, while sales are relatively moving up.

The purchasing power is huge, not only in the upper segment, the lower middle segment also moves significantly in the first half of 2017.

Read More: Infrastructure Development as The Key Factor to Improve Competitiveness

“The question is, will the property market move even higher in the second half of 2017?” said Ali.

He is aware of current market doubts, not to mention 2019 will be the political year, where the feud ahead of the General Election makes political tensions begin to heat up.

Under normal conditions, the property market cycle in Indonesia is expected to reach its highest point in 2019.

However, it seems that the 2019 election will be a major event that will make the political tension more heated. This factor is very influential psychologically to the property investment climate, especially in the upper segment.

“But we still believe that the property market cycle will show upward trend until 2019,” he added.

Positive movements will continue to occur although not significant until the second half of 2018, due to market participants who have not dared to speculate in the midst of warmed-up political conditions in Indonesia.

This means that the property market will rise a year ahead and back to stagnant in the next year, waiting for political stability in Indonesia.

“The impact of the political year is a temporary factor that will affect the property market cycle. However, this can not be interpreted that the property cycle decreases,” Ali explained.

Assuming that the general election is running smoothly, the property investment climate will still get tighter throughout 2019.

“We hope that the election will not negatively affect the property sector or the national economy. If the negative issue is very disturbing, then the property market will experience a longer market stagnation throughout 2019,” Ali said.

Anto Erawan

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