Residential Property Sector of Indonesia to Improve in 2017?
Colliers International Indonesia, a leading commercial real estate consultancy, expects to see an improvement in the residential property sector of Indonesia in 2017, particularly in the capital city of Jakarta, after this sector experienced two weak years previously. In terms of sales and price increases, apartments are most the promising property object this year according to analysts.
Ferry Salanto, Associate Director at Colliers International Indonesia, says price increases of vertical property in Jakarta (apartments) usually rise by an average of 10 - 15 percent year-on-year (y/y). However, in full-year 2016 these prices only grew by an average of (nearly) 4 percent. Moreover, rental prices fell as well last year, implying apartments were not a lucrative investment object for investors in 2016.
This year, however, Salanto expects to see an improvement with an estimated 10 percent (y/y) growth pace for prices of apartments in Jakarta. Especially those units that are developed for the city's middle class segment (with a price tag between IDR 300 million and IDR 1 billion, approx. USD $23,000 - $75,000). Salanto also detects a new trend, namely that property developers build apartments with relatively small units in order to make the price of each unit more affordable for the middle class.
According to data from Colliers there will be 28,014 new apartment units added to the market in 2017 in Jakarta (followed by 24,298 new apartment units in the following year). Most of these apartments are located in West and South Jakarta. By 2020 Jakarta is expected to have more than 247,000 apartment units.
It is assumed that many consumers in Indonesia preferred to wait for an improvement in economic growth first before investing in an apartment. In 2016 Indonesia's prolonged economic slowdown finally ended as annual gross domestic product growth accelerated to 5.0 percent (y/y) in 2016 from 4.8 percent (y/y) in the preceding year. This acceleration is expected to continue. The World Bank put its growth forecast for the Indonesian economy at 5.2 percent (y/y) in 2017.
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