Growth of Residential Property Prices in Indonesia Still Slowing in Q1-2014
The Residential Property Price Survey still indicates slowing growth of Indonesian residential property prices (in the primary market) in the first quarter of 2014. The Residential Property Price Index grew 1.45 percent (quarter to quarter) in the first quarter of 2014 or 7.92 percent year-on-year, lower than the growth that was recorded in the previous quarter of 1.77 percent (qtq) or 11.51 percent (yoy). The slowdown occurred in all types of homes, but in particular the medium and large homes segment.
Regarding the second quarter of 2014, the survey estimates that residential property prices will grow by 2.15 percent (qtq).
In line with the slowdown in residential property prices, the survey also indicates that growth in the volume of property sales is slowing. The volume of residential property sales grew only 15.33 percent (qtq) in the first quarter of 2014, down considerably from the previous quarterly growth figure of 31.54 percent (qtq). This decline is partly due to the impact of the Loan to Value (LTV) is implemented by Bank Indonesia in September 2013. The central bank of Indonesia increased the minimum down payment for additional property purchases in order to curb excessive loan growth and ease property speculation.
The survey also shows that the financing of residential property development is mainly done by internal cash reserves of developers. Roughly 59 percent of real estate developers use their own funds to finance the projects. Meanwhile, consumers still mostly use bank services to finance the purchase of property. A total of 72.32 percent of respondents use a mortgage for the purchase of residential property, particularly smaller types of property.