Indonesia’s house prices remain more or less steady, amidst the pandemic

Lalaine C. Delmendo | February 22, 2021

Indonesia’s residential property market has hardly moved. Adjusted for inflation, property prices actually fell by 0.2% last year, with the property price index (16 major cities) rising only by 1.29% during 2020, according to Bank Indonesia.  Looked at longer-term, property price rises are on a downtrend: up only 1.77% in 2019, 2.95% in 2018, 3.5% in 2017, 2.38% in 2016, 4.62% in 2015 and 6.29% in 2014.

Indonesia house prices

During the latest quarter, residential property prices rose by a meagre 0.1% q-o-q (0.26% inflation-adjusted).  “Almost all projects decided to not increase their asking prices. Thus, the average asking prices remains the same as 3Q 2020. We hope to see some improvement in the next year,” said Colliers International.

When inflation is taken into consideration, only nine major Indonesian cities recorded house price increases during 2020.


Major Cities Y-O-Y Change (%) Q-O-Q Change (%)
Nominal Real Nominal Real
Bandung 1.74 0.27 0.00 -0.35
Bandar Lampung 1.50 0.03 -0.02 -0.37
Banjarmasin 0.35 -1.10 0.08 -0.27
Denpasar 1.14 -0.32 0.39 0.04
Palembang 0.51 -0.94 -0.01 -0.36
Semarang 0.83 -0.63 0.26 -0.09
Yogyakarta 1.61 0.14 0.20 -0.15
Padang 1.75 0.28 0.00 -0.35
Medan 2.02 0.55 0.00 -0.35
Makassar 2.28 0.80 0.00 -0.35
Manado 2.50 1.02 0.44 0.08
Surabaya 1.59 0.12 0.17 -0.18
Pontianak 0.53 -0.93 0.10 -0.25
Batam 0.07 -1.38 0.08 -0.27
Balikpapan -0.78 -2.22 0.08 -0.28
Jabodebek-Banten 1.05 -0.41 0.11 -0.24
Pekanbaru 2.90 1.41 -0.02 -0.37
Samarinda 1.40 -0.07 -0.23 -0.58
COMPOSITE IN 18 CITIES 1.29 -0.17 0.09 -0.26
Sources: Bank Indonesia, Global Property Guide

In Jakarta, prices of strata title apartments rose by a minuscule 0.47% during 2020 to an average of IDR 34.96 million (US$2,500) per square metre (sq. m.), according to Colliers International.

Covid has had the expected effect. Residential property sales plummeted by 30.9% from a year earlier in Q3 2020, following y-o-y declines of 25.6% in Q2 and 43.2% in Q1, according to Bank Indonesia. On a quarterly basis, sales increased 7.9% in Q3 2020.

Residential construction activity was paralyzed last year due to pandemic-related restrictions and lockdown measures. During 2020, only 2,698 units were completed in Jakarta, down by 72.4% from the previous year’s 9,769 units.

After two decades of uninterrupted growth, Indonesia’s economy shrank by 2.07% in 2020, in sharp contrast to its 5% growth in 2019.

To boost economic activity, the government introduced a stimulus package worth IDR 744.28 trillion (US$53.26 billion) last year, including IDR 1.5 trillion (US$107.3 million) funds for the subsidized housing program, which is expected to cover financing for 175,000 new homes. On top of this, Finance Minister Sri Mulyani Indrawati recently announced that the government’s COVID-19 recovery budget for 2021 will be expanded further to IDR 619 trillion (US$ 44.4 billion), from the initial budget allocation of IDR 372.3 trillion (US$ 26.7 billion).

The economy is expected to grow between 4.5% and 5.5% this year, according to Indonesia’s chief economic minister Airlangga Hartarto. This is slightly more optimistic than the World Bank’s recent projection of a 4.4% growth.

Jakarta’s apartment prices steady

Prices of apartments in Jakarta rose by 0.47% y-o-y to IDR 34.96 million (US$2,500) per sq. m. in 2020, according to Colliers International.

Indonesia house price indices
  • In Jakarta CBD, the average price of strata title apartments rose by a meagre 0.13% y-o-y to IDR 52.32 million (US$3,741) per sq. m. in 2020.
  • In South Jakarta, the average price of strata title apartments rose by 0.37% y-o-y to IDR 39.27 million (US$2,808) per sq. m. in 2020.
  • In the capital’s non-prime areas, the average price of strata title apartments rose by 0.89% y-o-y to IDR 26.6 million (US$1,902) per sq. m. over the same period.


Area Y-O-Y (%) Q-O-Q (%) Average price (IDR/sq. m) Average price (USD/sq. m)
CBD 0.13 0.0 52,318,687 3,741
South Jakarta 0.37 0.0 39,266,783 2,808
Non-prime area 0.89 0.0 26,597,606 1,902
Average 0.47 0.0 34,960,000 2,500
Source: Colliers International

Jakarta’s residential construction grinds to a halt

In Q4 2020, only three high-end projects, with 2,049 units, were completed, according to Colliers International, down 17% from a year earlier: Arandra Residence (first tower), Sedayu City (first tower), and Newton 1 at Ciputra World 2.  In fact for the full year of 2020, only 2,698 units were completed.

“Developers scaled back their new launches in 2020 as a result of the COVID-19 pandemic,” said Colliers. “In 2021, we hope to see a better situation than in 2020. We assume more units could be completed than in year 2020, although unit totals are below average compared to previous years.”

Currently, there are 215,291 high-end apartment units in Jakarta.


Apartment Name Location Region Developer No. of Units
Gayanti City Jl. Gatot Subroto CBD PT Buana Pasifik International 174
Kebayoran Apartment (Ruby Tower) Kebayoran Lama South Jakarta Karya Cipta Group 336
Le’ Parc Jl. Thamrin CBD PT. Putragaya Wahana 100
Samara Suites Jl. Gatot Subroto South Jakarta Synthesis Development 800
Daan Mogot City (4 towers) Daan Mogot West Jakarta PT China Harbour Jakarta Real Estate Development 1,460
The Pakubuwono Menteng Jl. Sabang, Menteng Central Jakarta Pakubuwono Development 187
Dharma Tower Apartment Jl. Dharmawangsa VII South Jakarta PT Dharma Tatemono Property 72
Gayanti City Jl. Gatot Subroto CBD PT Buana Pasifik International 174
The Stature Jakarta Jl. Kebon Sirih Central Jakarta Capitaland and Credo Group 96
Apple Residence Jatipadang South Jakarta PT Diamond Land Development 300
Southgate Residence (2 tower) Jl. Tj Barat Raya, Jagakarsa South Jakarta Sinar Mas Land 489
Source: Colliers International

Coronavirus outbreak hits Bali’s tourism and property market

For the full year of 2020, foreign tourist arrivals in Bali plunged by 83% to just around 1 million, in contrast to a 3.55% increase in 2019, according to the Central Statistics Agency (BPS) - the lowest number of Bali arrivals in a decade. Likewise, tourist arrivals in Indonesia fell by 75% to just 4.02 million during 2020, from 16.11 million visitors in 2019.

In March 2020, the Indonesian government suspended its visa exemption policy for a short-stay visit, visa-on-arrival and diplomatic/service visa-free facilities for all countries to curb the spread of the deadly COVID-19 in the archipelago. Indonesia began easing some containment measures in June, but re-imposed a second round of coronavirus curbs between September and October and then in January 2021 due to a spike in infections.

Indonesia tourist arrivals

As a result, Bali’s economy shrank by 9.31% in 2020, according to the BPS. Recently, the Indonesian Hotel and Restaurant Association (PHRI) said that at least 60 hotels across the province are now for sale due to the continued decline in occupancy rates.

An estimated 30,000 expatriates live in Bali.

Sales plunging

Residential property sales plummeted by 30.9% in Q3 2020 from a year earlier, following y-o-y declines of 25.6% in Q2 and 43.2% in Q1, according to Bank Indonesia. Big houses saw the biggest decline in sales, falling by a whopping 60% y-o-y in Q3 2020. Sales for small properties fell by 25% while medium houses registered an annual sales decline of 29.3%.

“Based on commercial bank monthly report data as of September 2020, despite the banking industry lowering lending rates on housing loans in the third quarter of 2020 to 8.63% from 8.85% in the second quarter of 2020, respondents thought lending rates were still prohibitively high for small and medium house buyers,” the central bank added.

The average take-up rate for apartments in Jakarta stood at 87.2% in Q4 2020, at par with the previous year, according to Colliers International.

Tapera public housing savings program launched

Last year, the government enacted a law on public housing savings (Tabungan Perumahan Rakyat – Tapera) to create a new housing fund (BP Tapera) to help workers finance the purchase, construction or renovation of their first home.  All formal workers and individuals with monthly salaries at least equal to the minimum wage must contribute 3% of their pay (2.5% from employees and 0.5% from employers).

Participants have the option to withdraw up t0 30% of their fund balance for the purchase of a home or up to 10% for construction or improvements. In addition, those who have already made at least 12 consecutive monthly contributions will have the option to take out home loans from BP Tapera at interest rates of no greater than 5% per year. The government has recently allocated IDR 2.5 trillion (US$178.9 million) to fund said loan program.

The program is in line with the government’s program to build one million houses annually.

Indonesia plans to relax foreign ownership rules further

Last year, the government announced a plan to relax foreign homeownership regulations to boost the cooling property market. While no detailed plans have been released yet, many property developers and market analysts are optimistic, especially after the omnibus Law on Job Creation was passed in October 2020, which seeks to leverage foreign property investment as one of the pillars to stimulate economic growth after the pandemic.

“The potential of a foreigner being allowed to hold a (right-to-build) title in line with Indonesian citizens is a game changer. If it also allows for foreigners to mortgage in Indonesia it will open up a much larger market than in the past when it was all cash driven,” said Terje Nilsen, CEO of Seven Stones Indonesia. “This will encourage foreigners to choose Indonesia as a first or second home option. Especially now when more and more people work from home. And they can call Bali, and other places in Indonesia home.”

The last major liberalization came in December 2015, when 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.

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 IDR 1.5 billion, which is around US$107,000. This minimum purchase price is quite high in the Indonesian context.

Mortgage rates falling following central bank’s rate cuts

Bank Indonesia kept its key rate unchanged at a record-low of 3.75% in January 2021, following five consecutive rate cuts of a total of 125 basis points in 2020, to mitigate the impact of the pandemic.

As a result, the average for rupiah-denominated housing loan rate fell to 8.63% in Q3 2020, down from 9.34% a year earlier.

Indonesia interest rate

Moreover as part of the IDR 744.28 trillion (US$53.26 billion) stimulus package that the government unveiled last year, about IDR 1.5 trillion (US$107.3 million) will be injected into the country’s subsidized housing program, which is expected to cover financing for 175,000 new homes. In addition, the government will also provide homes to 88,000 poor households through the Housing Financing Liquidity Facility, as well as to 67,000 families via its newly-introduced savings-based monetary support.

Mortgage market remains small

When buying small and medium houses, 76.02% of respondents used mortgage loans in Q3 2020. Another 17.67% made progressive payments, while 6.31% used hard cash, according to the central bank’s Q3 2020 Residential Property Survey.

Despite this, the ratio of mortgage credits to GDP remains small, at around 3.3% in 2020, according to Bank Indonesia.

Indonesia housing loans

Indonesian developers find financing challenging. Memories of the Asian crisis are still alive. Banks tend to be extremely cautious in extending housing loans to the real estate industry, although Indonesian banks are strong and adequately capitalized. The increased uncertainty brought by the pandemic has exacerbated the situation.

That’s why as of Q3 2020:

  • 66.87% of residential property development projects were financed internally
  • Only 22.17% were financed through bank loans
  • 8.56% of projects were financed by consumer payments (pre-selling)

Rental yields good, but rents continue to fall

Gross rental yields on high-end properties in Jakarta range from 5.2% to 7.7%, according to Global Property Guide research. Yet due to strong demand for high-end apartments, prices have risen significantly in recent years, eventually resulting to lower rental yields than the 10% to 13% yields prevailing seven years ago.

Gross rental yields- the return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs - are an important consideration, because a high rental yield indicates that the property market is reasonably priced.

On Bali, lower rental yields can be earned, at around 4%.

However during 2020, the average rent for apartments in Jakarta fell by 5.11% y-o-y to IDR 223,789 (US$16) per sq. m., according to Colliers International.

Overall, the rental market has remained a tenant’s market last year, according to Colliers International. “The number of expatriates in Indonesia is still lower than before the pandemic, and the lower demand for expatriate housing has persisted. As a result, many landlords have struggled to find new tenants after previous tenants have left their properties. Thus, landlords have become more flexible in terms of payment methods, amenities and rental prices to attract potential tenants.”

Vacancy rates in the capital city averaged 20.7% during 2020, up by 2.3% from a year earlier, as rental demand from expats continue to fall due to the pandemic.

Indonesia’s rental market is expected to remain soft this year, with rents projected to continue falling until the end of 2021. “With unemployment likely to rise in the face of a global economic recession, overall rental growth is likely to be curbed in the short to medium term, and occupancy is likely to soften,” Colliers International noted.

“We expect downside pressure on rents to continue over H2 2021. However, once more countries have access to various vaccines, foreign worker traffic should improve.”

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

Despite the 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 with a selling price above IDR 30 billion (US$ 1.84 million) are subject to 20% sales tax.
  • 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.

Indonesia’s economy shrinks for the first time in two decades

After two decades of uninterrupted growth, Indonesia’s economy shrank by 2.07% in 2020 from a year earlier, in sharp contrast to a 5% growth in 2019, mainly due to the economic repercussions of the COVID-19 pandemic. Yet on a positive note, this is a fairly modest decline as compared to its regional peers.

Indonesia’s resilience can be attributed to its very domestically-driven economy. It tends to be insulated from global economic trends. In fact in recent years, Indonesia has enjoyed robust growth despite the global crisis. From 2000 to 2019, the economy grew by an average of 5.3% per year, according to the International Monetary Fund (IMF).

To boost economic activity, the government introduced a stimulus package worth IDR 695.2 trillion (US$ 49.8 billion) last year. Recently, Finance Minister Sri Mulyani Indrawati announced that the government’s COVID-19 recovery budget for 2021 will be expanded to IDR 619 trillion (US$ 44.4 billion), from the initial budget allocation of IDR 372.3 trillion (US$ 26.7 billion).

The economy is expected to grow between 4.5% and 5.5% this year, according to Indonesia’s chief economic minister Airlangga Hartarto. This is slightly more optimistic than the World Bank’s recent projection of a 4.4% growth.

“Indonesia’s economic performance continues to show a direction of recovery and is already on the right track,” said the country’s finance ministry. “Going forward, the direction of this recovery will be pushed more quickly, especially with the start of the vaccination in a measured and well-planned manner.”

Indonesia GDP inflation

Unemployment surged to 7.07% in Q3 2020, up from 5.28% a year earlier and the highest level since 2011, according to Statistics Indonesia. Over the same period, the total number of unemployed rose by 37.6% y-o-y to reach 9.77 million people.

In January 2021, overall inflation stood at 1.55%, down from 1.68% in the previous month and well below the central bank’s target range of 2% to 4%. From an average of 9.5% from 2001 to 2008, inflation dropped to an annual average of 4.7% from 2009 to 2019 and further to 2.1% in 2020.

Rupiah continues to appreciate

The Indonesia rupiah appreciated by 12.2% against the US dollar since April 2020 to reach an average exchange rate of IDR 14,021.3 = USD 1 in January 2021, thanks to the central bank’s efforts to defend the domestic currency amidst rising current account deficit and global uncertainty. This has more than offset the cumulative 4.4% depreciation in the value of rupiah against the US dollar in 2016 to 2019.

The rupiah is expected to strengthen further against the U.S. dollar this year as foreign investors could pile billions back into the country’s financial market.

Indonesia exchange rate

“With our fundamentally undervalued exchange rate, large interest rate differential and other positive factors, we continue to believe foreign portfolio inflow will be coming to Indonesia,” said Bank of Indonesia governor Perry Warjiyo.

Indonesia recorded a budget deficit equivalent to 6.1% of GDP in 2020, sharply up from shortfalls of 2.2% of GDP in 2019, 1.8% in 2018, and 2.5% in 2017, and actually the widest in decades, according to the Ministry of Finance. The country’s gross government debt increased to 38.5% of GDP in 2020, up from 30.5% of GDP in 2019, according to the IMF.

Jokowi: reform poster-boy no more

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 was a symbol of the demand for reform. However he is no longer the poster-boy for reform.

Jokowi is popular for his ambitious infrastructure programme, which include 222 projects involving the construction and building of roads, railways, bridges, power stations, oil refining plants, seaports, airports, dams, and more. Of these, over 20 have been completed and 127 are under construction.

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.

The government has implemented some land reform, which involves the distribution of land certificates to the poor and offering lower taxes and financial services to buoy small businesses.

Jokowi won a second term in office during the April 2019 elections, beating former lieutenant-general and longtime rival Prabowo Subianto.

However, Jokowi was criticized for his slow response to the COVID-19 pandemic. “The response of President Joko “Jokowi” Widodo’s government to the Covid-19 pandemic was weak, with low testing and tracing rates, and little transparency,” said the Human Rights Watch.

There are now about 1.2 million COVID-19 cases in Indonesia – the highest in Southeast Asia. The death toll has already reached more than 32,000 people as of mid-February 2021.

More generally, worrying trends towards corruption and authoritarianism have emerged. Bizarrely, he appointed Prabowo as his new defence minister, despite the horrendous reputation of the former lieutenant-General, who was dishonourably discharged from the army for human rights abuses after the Asian crisis, and has installed a large number of former regime members of Indonesia’s late dictator Suharto’s regime in his cabinet. There is also a growing tolerance of corrupt links between government and large conglomerates, reminiscent of the Suharto era, while amendments pushed through the Indonesian legislature in September 2019 have crippled Indonesia’s once potent anti-corruption agency. Finally, increasingly authoritarian attitudes to criticism and public protest have tarnished Jokowi’s reputation.


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