Indonesia’s housing market is a picture of stability

Lalaine C. Delmendo | March 29, 2020

Indonesian residential property market rarely makes big moves. The property price index (16 major cities) rose by 1.77% during 2019, according to Bank Indonesia, after rises of 2.95% in 2018, 3.5% in 2017, 2.38% in 2016, 4.62% in 2015 and 6.29% in 2014. However property prices actually fell by 1.17% last year, when adjusted for inflation.

Indonesia house prices

During the latest quarter, residential property prices rose by a meagre 0.3% q-o-q (0.19% inflation-adjusted).

Seventeen of Indonesia’s 18 major cities saw nominal property price rises in 2019. However, when inflation is taken into consideration, only the city of Medan actually recorded an increase in value of 4.53% during 2019.


Y-O-Y Change (%) Q-O-Q Change (%)
MAJOR CITIES Nominal Real Nominal Real
Bandung 1.07 -1.85 0.15 0.04
Bandar Lampung 0.28 -2.62 -0.02 -0.13
Banjarmasin 2.12 -0.83 0.00 -0.11
Denpasar 0.16 -2.73 0.03 -0.08
Palembang 1.22 -1.71 0.31 0.20
Semarang 1.10 -1.82 0.18 0.07
Yogyakarta 0.61 -2.30 0.28 0.17
Padang 0.72 -2.19 0.18 0.07
Medan 7.64 4.53 0.69 0.58
Makassar 1.52 -1.42 0.23 0.12
Manado 2.54 -0.42 0.06 -0.05
Surabaya 2.05 -0.90 0.99 0.88
Pontianak 0.97 -1.94 0.28 0.17
Batam -1.18 -4.03 -1.46 -1.57
Balikpapan 0.60 -2.31 0.08 -0.03
Jabodebek-Banten 1.40 -1.53 0.27 0.16
Pekanbaru 1.30 -1.63 0.51 0.39
Samarinda 2.18 -0.77 0.00 -0.11
COMPOSITE IN 18 CITIES 1.77 -1.17 0.30 0.19
Sources: Bank Indonesia, Global Property Guide

In Jakarta, prices of strata title apartments rose by 3% during 2019 to an average of IDR 34.8 million (US$2,130) per square metre (sq. m.), according to Colliers International.

Demand is almost steady. Residential property sales rose slightly by 1.19% in Q4 2019 from a year earlier, a sharp slowdown from the previous quarter’s 13.95% growth, according to Bank Indonesia. On a quarterly basis, sales actually declined 16.33% in Q4 2019.

Indonesia’s economy grew by 5.02% in 2019, slightly slower than the prior year’s 5.17% growth, as investment and exports weakened, according to Statistics Indonesia. Recently, Bank Indonesia trimmed its 2020 economic growth forecast to 5% - 5.4%, from 5.1% - 5.5%.

In March 2020, the Indonesian government unveiled its second emergency stimulus package worth US$8 billion, in an effort to protect the economy from the adverse impact of the coronavirus outbreak.

It provides a range of fiscal and non-fiscal incentives for the manufacturing sector and small and medium-sized businesses. This follows a US$725 million stimulus package announced last February 2020 to support tourism, the airline industry, and the property market. The package includes US$104 million funds for the subsidized housing program, which is expected to cover financing for 175,000 new homes.

Jakarta’s apartment prices rising modestly

Jakarta’s apartment market remains healthy, with prices rising by 3% y-o-y to IDR 34.8 million (US$2,130) per sq. m. in 2019, according to Colliers International.

  • In Jakarta CBD, the average price of strata title apartments rose by a meager 0.8% y-o-y to IDR 52.25 million (US$3,198) per sq. m. in 2019.
  • In South Jakarta, the average price of strata title apartments rose by 1.7% y-o-y to IDR 39.12 million (US$2,395) per sq. m. in 2019.
  • In the capital’s non-prime areas, the average price of strata title apartments rose by 3.5% y-o-y to IDR 26.36 million (US$1,614) 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 0.8 0.0 52,249,863 3,198
South Jakarta 1.7 0.7 39,121,166 2,395
Non-prime area 3.5 0.2 26,362,511 1,614
Average 3.0 0.6 34,800,000 2,130
Sources: Colliers International, Global Property Guide

For newly-launched apartment projects in Jakarta:

In Branz Mega Kuningan, located in Mega Kuningan, CBD, apartment prices range from IDR 53 million (US$ 3,259) to IDR 54 million (US$ 3,320) per sq. m., according to Colliers Internation. The project offers 512 units and is scheduled fro completion in 2023.

In Tamansari Skyhive, located in Jl. D.I. Pandjaitan, Kav.49, East Jakarta, apartments are currently offered for IDR 32 million (US$ 1,967) to IDR 34 million (US$ 2,090) per sq. m. It consists of 570 units and is expected to be completed in 2022.

Indonesia house price indices

In Pollux Sky Suites, situated in Jl. Mega Kuningan Barat III, CBD, prices of apartments range from IDR 45 million (US$ 2,767) to IDR 50 million (US$ 3,074) per sq. m. The project offers 194 units and is scheduled for completion in 2022.

In Branz Puri Indah, located in Jl. Meruya Selatan, Joglo, West Jakarta, apartments are offered for IDR 25 million (US$ 1,537) to IDR 30 million (US$ 1,844) per sq. m. The project offers 608 units and is scheduled for completion in 2022.

In Abode Sudirman Place, situated in Jl. Jendral Sudirman, Kav.35, CBD, the average price of apartments is IDR 70 million (US$ 4,304) per sq. m. The project consists of about 600 units and is scheduled for completion in 2023.

Coronavirus outbreak starts to hit Bali’s tourism and property market

Bali is one of Indonesia’s wealthiest regions, and saw unprecedented property price increases in recent years, thanks to its booming tourism. However, the coronavirus outbreak is expected to shut down the tourism sector and could prove catastrophic, given that about 80% of Bali´s local economy depends on tourism.

In February 2020, foreign arrivals in Bali fell to 392,824 people, down by 33% from the previous month, after the government imposed ban on tourists who had been in China in the past 14 days. In fact, only 4,820 Chinese tourists stayed in Bali in February, falling significantly from 113,745 people in January. As a result, Australia replaced China as the biggest source of foreign tourists in February, followed by India and Japan.

Indonesia tourist arrivals

In March 2020, the Indonesian government imposed more stringent travel restrictions by suspending itsvisa exemption policy for a short-stay visit, visa-on-arrival and diplomatic/service visa-free facilities for all countries for a period of one month to curb the spread of the deadly COVID-19 in the archipelago.

During 2019, Bali had recorded an increase in foreign arrivals of 3.55%.

An estimated 30,000 expatriates live in Bali.

Sales are almost steady

Residential property sales rose slightly by 1.19% in Q4 2019 from a year earlier, a sharp slowdown from the previous quarter’s 13.95% growth, according to Bank Indonesia. On a quarterly basis, sales actually declined 16.33% in Q4 2019.

Big houses saw surging demand with sales rising by a whopping 81.6% y-o-y in Q4 2019. Sales for small properties were almost steady while medium houses registered an annual sales decline of 14.73%.

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.

The average take-up rate for apartments in Jakarta stood at 87.2% in Q4 2019, slightly down from 87.5% in the previous quarter but up from 86.9% in the same period last year, according to Colliers International. Take-up rate is projected fall to about 85% to 86% in the next two years.

Government considers second Tax Amnesty Program

Last year, Finance Minister Sri Mulyani Indrawati hinted on the possibility of launching a second tax amnesty to accommodate those who had missed the first amnesty two years ago. This came after the Automatic Exchange of Information took effect on September 2018, which helped the Indonesian government to become more informed about financial and nonfinancial assets kept in 90 countries, including the country’s favorite tax havens Singapore and Hong Kong.

“I did not know the data, but now I do. And then came the aspiration for a second tax amnesty,” said Sri Mulyani. “We are now weighing up everything. We will see if the situation makes it possible.”

Real estate was boosted by the huge Tax Amnesty (Pengampunan Pajak) - Law No. 11 Year 2016 - ending in March 31, 2017, which covered:

  • 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

“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.”

While no official figures are available, Indonesia Property Watch predicted that about 60% of all repatriated funds would be invested in property, particularly at the luxury end. This was supported by Thomas Angfendy of Metropolitan Land, who said that the amnesty program has increased sales for the higher-middle class and high-end residential segments but not in the lower segments.

A total of 965,983 people joined the tax amnesty program, earning forgiveness by paying a limited amount of outstanding taxes. About IDR 4,865.7 trillion (US$ 300.5 billion) worth of assets was declared to Indonesia’s Tax Office, equivalent to nearly 40% of the country’s GDP. However, in terms of asset repatriations, the program received only 15% of target, with IDR 147 trillion (US$9.1 billion) repatriations.

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 - but the real estate market is a major beneficiary.

Foreign ownership rules

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.

The new regulations have buoyed 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.

Indonesia exchange rate

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$93,000. This minimum purchase price is quite high in the Indonesian context.

Mortgage rates falling following central bank’s rate cuts

Bank Indonesia slashed its key rate by 25 basis points to 4.5% in March 2020 to mitigate the impact of the COVID-19 outbreak, following five consecutive rate cuts of a total of 125 basis points since July 2019.

As a result, the average for rupiah-denominated housing loan rate fell to 9.12% in Q4 2019, down from 9.68% a year earlier.

Indonesia interest rate

Moreover as part of the US$725 million stimulus package that the government unveiled last February 2020, about US$104 million will be injected into the country’s subsidized housing program, which is expected to cover financing for 175,000 new homes. About US$55 million will be used for interest payments.

Mortgage market remains small

When buying small and medium houses, 71.88% of respondents used mortgage loans in Q4 2019, down from 76.73% a year earlier. About 20.23% make progressive payments, while 7.89% buy using hard cash, according to the central bank’s Q4 2019 Residential Property Survey.

Despite this, the ratio of mortgage credits to GDP remains small, at around 3% in 2019, according to Bank Indonesia.

Indonesia housing 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 Q4 2019:

  • 58.8% of residential property development projects were financed internally
  • Only 26.59% were financed through bank loans
  • 10.67% of projects were financed by consumer payments (pre-selling)

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

Gross rental yields on high-end properties in Jakarta range from 5.2% to 7.7%, according to Global Property Guide research conducted in July 2019. 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 six 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%.

During 2019, the average rent for apartments in Jakarta was IDR 427,882 (US$26.3) per sq. m., according to Colliers International. With the expected addition of eight new high-end projects, rents are projected to continue to grow by around 3% to 4% annually in the next four years.

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.

Two decades of uninterrupted economic growth

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 2000 to 2018, the economy grew by an average of 5.4% per year, according to the International Monetary Fund (IMF).

In 2019, the economy grew by 5.02% from a year earlier, slightly slower than the prior year’s 5.17% growth, as investment and exports weakened, according to Statistics Indonesia.

Indonesia GDP inflation

Recently, Bank Indonesia trimmed its 2020 economic growth forecast to 5% - 5.4%, from its earlier projection of 5.1% - 5.5%. Other international organizations such as OECD and Fitch Solutions estimate that Indonesia’s growth will not reach 5% this year.

Tourist arrivals rose by only 1.8% to 16.1 million in 2019, a sharp decline from the annual average growth of 12% from 2013 to 2018, according to Statistics Indonesia.

The tourism sector is expected to receive a further blow this year, after the government imposed travel bans and suspended itsvisa exemption policies to curb the spread of COVID-19.

The Indonesia rupiah appreciated by 10.4% against the US dollar in the past seventeen months to reach an average exchange rate of IDR 13,757.9 = USD 1 in February 2020, thanks to the central bank’s efforts to defend the domestic currency amidst rising current account deficit and worsening global trade tensions. This partially offsets the 13.7% drop in its value against the US dollar from September 2016 to October 2018.

Indonesia recorded a budget deficit of IDR 353 trillion (US$21.6 billion) in 2019, equivalent to 2.2% of GDP in 2019, wider than the government’s target of 1.8% and the prior year’s shortfall of 1.76% of GDP, according to the Ministry of Finance. The country’s government debt stood at about 30.2% of GDP in 2019.

Unemployment stood at 5.28% in Q3 2019, almost unchanged from a year earlier, according to Statistics Indonesia.

In 2019, overall inflation slowed to 2.72%, down from 3.13% a year earlier and the lowest level in about two decades. From an average of 9.5% from 2001 to 2008, inflation dropped to an annual average of 5.1% from 2009 to 2018. In February 2020, inflation was 2.98%.

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 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 a 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 general and longtime rival Prabowo Subianto. He plans to push ahead with sweeping economic reforms to buoy investments and create more jobs in the country.


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