Modest house price rises in Indonesia

February 12, 2018

Indonesia house pricesThe Indonesian residential property price index (16 major cities) rose by 3.32% during the year to Q3 2017, according to Bank Indonesia, but when adjusted for inflation, property prices actually fell by 0.47% in Q3 2017 from a year earlier. 

During the latest quarter, residential property prices rose by a meagre 0.5% (0.3% inflation-adjusted).

Residential property has been attractive to rich Indonesians and others partly as a protection against inflation.

All Indonesia’s major cities saw nominal property price rises. Surabaya led the price hikes with house prices rising by 6.86% (2.94% inflation-adjusted) during the year to Q3 2017, followed by Bandung (5.22%), Jabodebek-Banten (3.65%), and Bandar Lampung (3.34%). Smaller house price rises were registered in Manado (2.34%), Semarang (2.2%), Banjarmasin (2.1%), Makassar (1.82%), Batam (1.75%), Palembang (1.67%), Yogyakarta (1.36%), Padang (0.95%), Pontianak (0.85%), Medan (0.8%), Denpasar (0.58%), and Balikpapan (0.29%).

However, when adjusted for inflation, all cities, except Surabaya and Bandung, actually recorded declines in value, ranging from 0.15% for Jabodebek-Banten to 3.39% for Balikpapan.


  Y-O-Y change (%) Q-O-Q change (%)
Major cities Nominal Real Nominal Real
Bandung 5.22 1.36 2.22 1.40
Bandar Lampung 3.34 -0.44 3.13 2.30
Banjarmasin 2.10 -1.65 0.28 -0.52
Denpasar 0.58 -3.11 -0.59 -1.38
Palembang 1.67 -2.06 0.24 -0.56
Semarang 2.20 -1.55 0.53 -0.27
Yogyakarta 1.36 -2.36 0.13 -0.67
Padang 0.95 -2.76 0.18 -0.62
Medan 0.80 -2.89 0.28 -0.52
Makassar 1.82 -1.92 1.38 0.57
Manado 2.34 -1.41 0.44 -0.36
Surabaya 6.86 2.94 1.11 0.31
Pontianak 0.85 -2.85 0.13 -0.67
Batam 1.75 -1.98 -0.04 -0.84
Balikpapan 0.29 -3.39 0.09 -0.71
Jabodebek-Banten 3.65 -0.15 0.14 -0.66
Composite 16 Cities 3.32 -0.47 0.50 -0.30
Source: Bank Indonesia

Prices of strata title apartments in Jakarta rose by 4.6% during the year to Q3 2017 to an average of IDR 32.7 million (US$2,289) per square metre (sq. m.), according to Colliers International.

“Apartment prices are anticipated to grow by 4.5% to 5% by the end of 2017 and will rise to 6% to 8% in 2018 on the back of better economic projection, which in turn will improve sales performance,” said Colliers International.

In 2017, the economy grew by a healthy 5.05%, at par with the previous year’s 5.02% growth, fuelled by rising commodity exports, as well as strong public infrastructure investment, according to Bank Indonesia. The Indonesian economy is expected to remain strong this year, with a projected GDP growth rate of 5.1% to 5.5%.

Property sales growth slowing

The average take-up rate for apartments in Jakarta fell slightly to 85.6% in Q3 2017, from 86.9% in the same period last year, according to Colliers International. Residential property sales rose by a modest 2.58% q-o-q in Q3 2017, down from quarterly growth rates of 3.61% in Q2 2017, 4.16% in Q1 2017 and 4.65% in Q4 2016, and double-digit rises from 2013 to 2015, according to Bank Indonesia.

Partly to buoy property demand, the government has cut the key interest rate, given tax incentives to Indonesian REITs, eased restrictions on individual foreign ownership, increased the loan-to-value ratio, and increased the threshold for luxury property tax.

Around 15,292 apartments units were added to the total apartment supply in Jakarta in 2017, according to Colliers.

  • In 2012, the total apartment supply in Jakarta was 19,706 units, leading to a cumulative stock of 117,276 units at end-2012.
  • In 2013, the total supply was 15,068 units.
  • In 2014, the total supply was 10,701 units.
  • In 2015, 14,000 apartment units were added.
  • In 2016, the total supply was 19,271 units, leading to a cumulative stock of 176,178 units.

It is expected that around 34,043 apartments will be added in 2018, and another 9,509 units in 2019 (all figures from Colliers).

About 1,804 units were completed in Jakarta in Q3 2017, including Puri Orchad (960 units), Maqna Residence (312 units), Kebayoran Icon (256 units), St. Moritz (159 units), and Pancoran China Town (117 units).

West Jakarta has the highest share to the total existing supply of 22% in Q3 2017, followed by North Jakarta and South Jakarta, accounting for 20% each.


Name of Development Location Region Developers No. of Units
Kebayoran Icon Jl. Ciledug Raya South Jakarta Tamara Land 256
Puri Orchad (Orange Grove Tower) Jl Raya Adicipta West Jakarta PT Adicipta Graha Kencana (Serenity Group) 960
Maqna Residence Jl. Meruya Ilir No. 88 West Jakarta PT. Graha Meruya 312
Pancoran China Town (Lucky Tower) Jl. Pancoran No.42 A, Glodok West Jakarta PT. Supra Megah Utama 117
St. Moritz (New Presidential Tower) Jl. Puri Indah West Jakarta Lippo Karawaci 159
Source: Colliers International

Jakarta’s apartment prices up

Jakarta’s apartment market remains strong, with prices rising by 4.6% y-o-y to IDR 32.7 million (US$2,289) per sq. m., according to Colliers International.

  • In Jakarta CBD, the average price of strata title apartments rose by 3.1% y-o-y to IDR 50.47 million (US$3,533) per sq. m. in Q3 2017.
  • In South Jakarta, the average price of strata title apartments rose by 2.8% y-o-y to IDR 37.96 million (US$2,657) per sq. m. in Q3 2017.
  • In the capital’s non-prime areas, the average price of strata title apartments rose by 5.7% y-o-y to IDR 24.8 million (US$1,736) per sq. m. over the same period.

In Aerium (South Tower), located in Jl. Pulau Melintang, Kembangan Utara, West Jakarta, apartment prices stood at IDR 25 million (US$1,878) to IDR 28 million (US$2,103) per sq. m. in Q3 2017, according to Colliers International. The project offers 366 units and is scheduled for completion in 2020.

In The Padmayana, situated in Jl. Sinabung Senayan, South Jakarta, apartments are offered for at least IDR 46 million (US$3,455) per sq. m. in Q3 2017. The Padmayana has about 145 units and is scheduled for completion in 2021.

In The Newton 2, located in Jl. Karet Sawah, CBD, apartment prices ranged from IDR 44 million (US$3,304) to IDR 46 million (US$3,455) per sq. m. in Q3 2017. The project offers 624 units and is scheduled for completion in 2021.

In 57 Promenade (2 Tower), located in Jl. Kebon Melati, CBD, apartment prices ranged from IDR 52 million (US$3,905) to IDR 55 million (US$4,131) per sq. m. over the same period. The project is expected to offer 496 units and is scheduled for completion in 2022.


Area Y-O-Y (%) Q-O-Q (%) Average price (IDR) Average price (USD)
CBD 3.1 0.8 50,468,454 3,533
South Jakarta 2.8 0.7 37,959,967 2,657
Non-prime area 5.7 1.8 24,795,184 1,736
Average 4.6 0.9 32,702,508 2,289
Source: Colliers International

Bali’s stunning growth

Bali is one of Indonesia’s wealthiest regions, and saw unprecedented property price increases in recent years. Both Indonesians and foreigners are keen to invest here. About 80% of Bali’s economy depends on tourism. Global media attention hasn’t harmed it, including the 2010 movie “Eat, Pray, Love”. An estimated 30,000 expatriates live in Bali.

Six years ago, a four-bedroom villa built in a freehold land in Berawa was priced between USD600,000 and US$700,000. Now, that same villa is worth USD1.7 million.

“Bali has, over 10 to 12 years, been the best-performing real estate class in terms of vacant land appreciation in the world,” said Matthew Georgeson of Elite Havens. This is mainly due to planning restrictions that limit building height to four storeys.

Villas in Bali are priced at around US$1,100 to US$2,300 per sq. m. last year.

  • In BASK, a luxury beachfront villa resort on the island of Gili Meno, prices range from USD210,000 for studio to USD1.2 million from three-bedroom villa.
  • In Seminyak resort, a three-bedroom villa is priced for USD875,000.
  • In South Bukit, a high-end, cliff-front villa is priced fro USD6.5 million.

Indonesia’s strong economy will likely trigger rising demand in Bali, causing prices to continue climbing.

Tax Amnesty Program expected to boost the real estate market

Indonesia’s Law No. 11 Year 2016 on Tax Amnesty (Pengampunan Pajak) ended in March 31, 2017. It provided a limited-time opportunity for taxpayers to pay a defined amount of tax, to earn forgiveness of their outstanding tax liabilities including penalties and interest charges relating to:

  • Income tax (Pajak Penghasilan);
  • Value added tax (Pajak Pertambahan Nilai), and;
  • Luxury Goods Sales Tax (Pajak Penjualan atas Barang Mewah).


  Target Actual Achievement
Redemption Payments IDR 165 trillion IDR 114 trillion 69.1%
Declaration of Funds IDR 4,000 trillion IDR 4,866 trillion 121.6%
Repatriation of Funds IDR 1,000 trillion IDR 147 trillion 14.7%
Source: Direktorat Jenderal Pajak Kementerian Keuangan

A total of 965,983 people joined the country’s ambitious tax amnesty program. In addition, about IDR 4,865.7 trillion (US$ 365 billion) worth of assets has been declared to Indonesia’s Tax Office under the program, which is equivalent to nearly 40% of the country’s GDP. However, in terms of asset repatriations, the program received about IDR 147 trillion (US$11 billion), which was just about 15% of the target.

Repatriated offshore assets must be invested in Indonesia in defined instruments, and stay three years in the country. 

The funds are needed to directly finance Jokowi’s ambitious infrastructure programs, which include building ports, roads and railways.

The real estate market is a major beneficiary. “The key issue in the Indonesian residential property market currently is that buyers of mid- to high-end residential properties have large amounts of undeclared income,” said Bernard Kie and Hasira de Silva of Fitch Corporate Ratings Group in Jakarta and Singapore.

“The imposition of the tax amnesty should help overcome this and encourage buyers to declare more of their income, thereby stoking fresh demand.”

Jokowi’s Presidency

Joko Widodo ("Jokowi"), the Democratic Party nominee, became president of Indonesia on 20 October 2014. A man of the people, a campaigner for clean government, and a highly successful and popular former mayor of Jakarta, Jokowi is a symbol of the demand for reform which is increasingly sweeping Indonesia.

Quite aside from his popular appeal, and his "blusukan" - regular visits to poor areas across Jakarta wearing simple informal clothes and chatting to people about problems like the price of food, housing, local and flooding and transport problems - Jokowi was an effective reformer during his time as mayor, creating a bureaucratic recruitment system called "lelang jabatan", giving every civil servant the same opportunities by fulfilling the required qualifications and passing the test, whose results were announced transparently.

Jokowi previously introduced a "Healthy Jakarta card" for health insurance, inaugurated the construction of the Jakarta MRT, and re-started the construction of the green line of the Jakarta Monorail. He also initiated programs aimed towards transparency, such as online taxes, e-budgeting, e-purchasing, and a cash management system.

Jokowi was supported by former president Megawati Sukarnoputri, and almost half his cabinet appointees were her people, which has disappointed many observers. But given a largely hostile legislature stuffed with vested interests, Jokowi faces tough challenges in moving ahead with his reform agenda.

He has been keeping his reform promises. He has raised the government-subsidized petrol price by more than 30%. Previously fuel subsidies had consumed US$21 billion, or 13% of Indonesia’s national budget. Wealthy car drivers, who make up a tiny fraction of Indonesia’s 250m population, benefited the most from cheap petrol, as well as smugglers. Jokowi promised to cushion the effect of the price rise for poorer Indonesians by distributing benefits through its new education, health and welfare cards.

In November 2017, Japan agreed to extend a US$1 billion loan to build a deep-sea port on the main island of Java, with construction to begin in March 2018. In addition, the construction of Jakarta-Surabaya line is scheduled to begin by end-2018, which is expected to reduce travel time for the 800-km journey between Jakarta and Surabaya from 10 hours currently to around 5 to 6 hours.

Liberating reforms boosting real estate market

Indonesia president Joko Widodo has introduced hard-hitting economic reforms – and, the real estate sector is included. Taxes in the real estate market, especially on real estate investment trusts (REIT), were reduced substantially to attract capital inflows into the local market.

Regulation No. 40 of 2016, which came into force on 17 October 2016, lowered the tax rate on the sale of property to real estate investment trusts (REIT) from 5% to 0.5%.

The potential REITs to be listed in Indonesia could reach IDR 30 trillion (US$2.25 billion), according to Muliaman Hadad, chairman of Financial Services Agency (OJK). In fact when the plan to reduce the tax on REITs was unveiled in early 2016, real estate development giant Lippo Group had immediately declared its plan to shift its two REITs worth around US$2.6 billion from Singapore to Indonesia, as well as issue US$452 million REITs over the next two years. Rivals Cipultra Development and Summarecon Agung are also considering issuing their own REITs, with aims to raise more than US$560 million in total.

“A lot of property developers have shown their interest and the potential amount could be bigger than Singapore market,” said Hadad.

The new policy is expected to increase transparency in the real estate market and will make it easier to get information on rentals and yields.

In 2015, Indonesia removed the double taxation on REIT (eliminating the obligation to pay 15% income tax on rents or capital gains made by REIT), as part of the government’s fifth stimulus package.

New foreign ownership rules introduced

Indonesia exchange rate

In early 2015, a law was passed to allow foreigners to purchase luxury real properties in Indonesia. However, the law applies only to luxury residences priced above IDR10 billion (US$700,000).

Then in December 2015, Regulation No. 103/2015 on House Ownership of Foreigners Residing in Indonesia allowed foreigners to own landed houses in Indonesia for a period up to 80 years. Under the law, foreigners can now purchase a landed house or an apartment under the so-called “right-of-use” (hak pakai) title for an initial period of 30 years. The foreigner can extend the ownership twice – by 20 years and then by another 30 years. However, if the foreigner (or his heir) leaves Indonesia to reside in another country, then he/she needs to release or transfer the ownership rights to another person who meets all requirements.

It is hoped that the new regulations will boost investor confidence and expand the local real estate market to international homebuyers.

Currently, land titles (hak milik) can only be held by Indonesian citizens. Foreign land ownership is against the constitution.

For apartments, the 1996 regulation (No. 41/1996) states that foreigners who reside in Indonesia, or visit the country regularly for business purposes, can purchase a home, apartment or condominium as long as it isn’t a part of a government-subsidized housing development. Again, foreigners can only hold land-use (hak pakai) deeds, and most developments hold right-to-build deeds (hak guna bagunan). It is not possible for someone to have a land-use deed for a sub-unit of a right-to-build deed. The length of these titles varies as well. Therein lie some of the difficulties and unclear ownership issues.

So foreigners can effectively only lease, but not truly own, an apartment for up to 70 years. Within this 70-year period, foreigners must also periodically renew their right to use. The initial hak pakai period is for 25 years, then renewed for an additional 25 years and finally 20 years.

Additionally, the threshold or minimum property sales price that a foreigner can purchase is 1.5 billion Indonesian Rupiah, which is around USD 105,000.  This minimum "purchase" price is quite high in the Indonesian context.

Mortgage interest rates are falling

Indonesia interest rate

In August 2017, Bank Indonesia made its second interest rate cut this year, cutting the key rate by 25 basis points to a record low of 4.25%. It’s a big change from December 2005, when Bank Indonesia’s policy interest rate stood at 12.75%. In December 2017, the central bank kept the key rate unchanged, amidst low inflationary pressures and stable rupiah.

Mortgage rates offered by state-owned banks range from 9.69% to 13.02% in Q3 2017, according to Bank Indonesia. Among the major banks, the highest housing loan rates were offered by OCBC NISP at 12.5%, while the lowest rates were offered by HSBC at 9%.


National Banks
BRI 10.25%
Mandiri 10.25%
BNI 10.50%
BTN 10.25%
BCA 10.00%
Danamon 10.50%
OCBC NISP 12.50%
Bank Mayapada 11.50%
Overseas Banks
Citibank 8.25%
CTBC Bank 9.65%
UOB 10.65%
HSBC 9.00%
Sources: Financial Services Agency (OJK), Colliers International

Mortgage market small

The share of mortgage credits to GDP remains small, at around 2.9% of GDP in 2017, according to Bank Indonesia’s Q3 2017 Residential Property Survey.

When buying small and medium houses 76.42% of respondents use mortgage loans. 17.13% make progressive payments, while 6.45% buy using hard cash.

Indonesia residential mortgage loans

Indonesian developers find financing challenging. Memories of the Asian crisis are still vivid. Banks tend to be extremely cautious in extending housing loans to the real estate industry, although Indonesian banks are strong and adequately capitalized.

That’s why as of Q3 2017:

  • 56.75% of residential property development projects were financed internally
  • Only 31.18% were financed through bank loans
  • 8.95% of projects were financed by consumer payments (pre-selling)

Rental yields good, but property investment may be unattractive for foreigners

Gross rental yields in Jakarta - the return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs - are now very attractive, though lower than they were 4-5 years ago.  Gross rental yields are an important consideration even for those who do not intend to become landlords, because a high rental yield indicates that the property market is reasonably priced.

Gross rental yields on high-end properties in Jakarta remain high, ranging from 8.6% to 9.6%, according to Global Property Guide research. Yet due to strong demand for high-end apartments, prices have risen significantly in recent years, eventually causing lower rental yields than the 10% to 13% yields prevailing five years ago.

On Bali, lower rental yields can be earned, ranging from 3.8% to 5.0%.

The average rent for apartments in Jakarta currently ranges from US$1,000 to US$2,500.

Apartment rents are expected to increase modestly by around 3% to 5% in 2018, according to Colliers.

Property investment in Indonesia remains unattractive, due to high tax rates

Despite these high rental yields, property investment is still relatively unattractive for foreigners, because of complex legalities and high tax rates on non-resident owners.

  • The tax levied on the average annual income on a rental apartment/property in Indonesia is 20% which is the third highest in Asia, only after Bangladesh (25%) and Malaysia (22.4%).
  • A 10% Value-added tax (VAT) is levied on gross rental income.
  • Capital gains realized by individuals from the sale of real property in Indonesia are taxed at a flat rate of 5%. The tax base is the transfer value of the property, without any deductions.
  • Sales of luxury houses, apartments, townhouses, and condominium units are subject to 20% sales tax. Luxury houses and townhouses have a selling price of IDR20 billion (US$1.5 million) and above. Luxury apartments and condominium units have a selling price of IDR10 billion (US$750,000) and above.
  • Property tax is levied at 0.5% on the assessed value of the property. The assessment value of taxable property is determined as a percentage of the deemed fair market value of the property.

The total cost of buying and then re-selling a residential property (including Registration costs, Real estate agent fees, Legal fees, Sales and transfer taxes), is one of the highest in the region (see Indonesian round-trip property purchase costs, compared to the region).

However, changes in the law are in process which should make things much easier.

Almost two decades of uninterrupted economic growth

Indonesia GDP inflation

Indonesia’s economy is very domestically-driven. It tends to be insulated from global economic trends. In fact in recent years, Indonesia has enjoyed robust growth despite the global crisis. From 2006 to 2016, the economy grew by an average of 5.7% per year, according to the International Monetary Fund (IMF).

In 2017, the economy was estimated to have expanded by a healthy 5.05%, at par with the previous year’s 5.02% growth, according to Bank Indonesia. This was mainly fuelled by rising commodity exports, as well as strong public infrastructure investment.

Economic growth is expected to accelerate to 5.1% to 5.5% in 2018, on the back of rising investment, more fiscal stimulus and growing exports, according to Bank Indonesia.

In Q3 2017, nationwide unemployment stood at 5.5%, up from 5.33% in the previous quarter but down from 6.18% a year earlier, according to the country’s statistics agency, Badan Pusat Statistik Indonesia (BPS).

In 2017, overall inflation was 3.61%, a slight increase from 3.02% in 2016 and 3.35% in 2015, fuelled by an increase in food prices and transportation costs, according to the BPS. From an average of 9.5% from 2001 to 2008, inflation dropped to an annual average of 5.5% from 2009 to 2016, according to the IMF. The overall decline in inflation suggests that the recent stepping-up in the key interest rate has worked, and that Indonesia’s growing economy is becoming more flexible and productive as it grows.

Inflation is expected to fall in the lower end of the central bank’s target range of 3% to 5% in 2018, amidst the government’s promise to not raise fuel prices – a populist move ahead of the 2019 general elections.

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