Thursday, 27 September 2012


Housing for the lower middle class would still mushroom all over the place. Predictably in the next two years according to research of Coldwell Banker Indonesia (for the period of 2012) residential homes for the lower-middle class would still prevail in the domestic property market in Indonesia.

In view of Indonesia’s macro economy which would predictably be well sustained through 2012, the housing sector would remain prospective. The supporting factors were as follows:

Firstly, Indonesia’s projected economic growth of around 6.5% with Gross Domestic Product totaling Rp 7,000 trillion. A considerably high economic growth would bring optimism to businesspeople to keep expanding business which would jack up performance of the business world.

Secondly, demand for housing kept growing by 12% against previous years. Indonesia’s vast population, around 243 million people of which 50% were the new rising middle class who aggressively seek for shelter.

The growing number of young couples and young executive as buyers and end users contributed to dynamiting process of house building for the lower-middle class. Most of them were first home buyers who buy houses to dwell not for investment. This was some sort of demographic bonus to the development process which would boost demand for homes especially in the big cities in Indonesia. 

Thirdly the Government’s support who offered a popular program of low cost home for the people which was implemented through application of Liquidity Facilities for Home Financing (FLPP) which offered bank’s credit of low interest.

Fourthly facilitation of Mortgage Services (KPR) which was stable and constantly. Some banks even dared to set single digit mortgage interest. Sound and healthy bank’s liquidity contributed to bank’s aggressiveness in marketing KPR facilities.

Fifthly, high accumulated figure of housing shortage known as backlog.

Sixthly, enhanced infra-structure building, especially toll roads in some regions. Development of infra-structure (land, sea and air transportation, electricity and telecommunication) which were widely spread in many regions were contusive to housing development, as indicated by widespread housing development. It came as no surprise that under such circumstances developers were aggressively building houses in many locations.

Survey over property prices carried out by Bank Indonesia unveiled that there was high tendency of growing demand in this sector the high public demand, according to BI’s survey was also driven by offerings of property prices which were relatively stable particularly of the small and medium homes category.

BI had recorded a three-monthly price increase of homes over quarter 1 of 2012 for all types of houses. The highest price increase was on big type homes 0.90%. Meanwhile for the yearly cycle, price of all types of homes increased but the increase rate was slowing down against the previous year.

The highest increase was on small type of house 4.42%. The term “small house” in this survey referred to the type of house less than 36 m2 in area whilst “medium type” referred to types of house in the range of 36 – 70 M2 and “big house” meant above 70 M2.

Data of some developers showed that small and medium types of houses still had great potential to sell in the property market where demand exceeded supply.

Real estate circles in Indonesia (REI) projected many developers at home would be actively engaged in building middle and low cost homes. This year the number of medium and small house to be built in Indonesia was projected to be around 120 thousand to 150 thousand units nationwide.

One of the regions where building of medium houses was underway was for example Depok. The building of Cinere-Jagorawi and Depok-Antasari toll roads jacked up price of land in Depok city. In spite of increased price of land due to toll road projects, increased price of land in Depok was not as drastic as in other supporting areas of Jakarta like Tangerang. The reason was because in Depok houses being built were more of the middle and lower types.

The region where price of land rose significantly was Tangerang, which might be rated as exceptional compared to other regions. Although Tangerang was densely populated, demand here was still high due to development of exclusive real estates like Bumi Serpong Damai (BSD) where increase could be 50% and in the surrounding areas around 35%.

The Government’s support in the form of infra structure building additional appeal for developers and investors to that area. Hence combination of Government’s support, participation of banks as financial institution, strategic planning of developers and great consumer’s potential, plus sound underlying infra structure were the reasons for optimism for the prospect of property sector till end of year. 

Business News -  August 10, 2012

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