Property Business Conditions in Indonesia 2013-2014

16 October 2013

The weakening of rupiah against the U.S. dollar generated many people aware of the turmoil and changes of economic conditions in Indonesia. The rupiah is exceeded USD . 11.000 per U.S. dollar in early September 2013 . Negative sentiment , both from external and internal factors made rupiah weakened dropped drastically. Business based on import activities is expected to slow down, because of commodity prices will tend to rise and affect people's purchasing power. And also, the government will make policies to control import activities through the tax instrument. Otherwise , businesses based on export tend to more profitable and its growing will be increasingly driven by the national government to improve cash flow. Meanwhile, balance of trade deficit contributed to decline of rupiah.

            Most of the property business will rely on imported commodities that the impact of the weakening rupiah conditions. The developers and entrepreneurs in property business already poised to take policy of raising property prices and rents. Some developers companies, one of which is PT Intiland Development predicts property prices will rise up to 8-10 % . But on the other hand , Investors are still interested in investing in Indonesia, especially foreign investors . This conditions could be a sign that growth of property business is still competitive . Disregard the problems weakening of the rupiah against the U.S. dollar , the economic problems in Indonesia in 2013 is often associated with the impact of rising fuel price (BBM) a few months ago and political issues of the pre-election 2014. Some property and business observers have predicted that property business growth tends to stagnate , or even has a possibility to slowdown. However , keep in mind that the investment climate in Indonesia has not been supported by legal and regulatory which that ensures the investment process, according to the procedures and mechanisms .

            Recent years, the Indonesian property market was increasing in diverse and competitive. Residential property market houses (landed house) is still the most favorite product , but because of availability of land ( especially in Jakarta ) is very limited, apartment or condotel be an alternative option. Apartments growth in Jakarta dominated by lower middle class , while the middle class to quite limited its availability . According to Bank Indonesia, sales of apartments that are still in the construction phase as many as 2,352 units or 91.14 per cent, impact on the increase in sales of apartments from 95.30 percent to 95.33 percent . Based on result of survey of Commercial Property Development Bank Indonesia (BI) last year (fourth quarter 2012) has occured an additional supply of apartments in three regions (Bekasi , Depok , Tangerang ) as much as 3,806 units. The supplies comes from 8 apartment project, which will operate at first quarter of 2013. This year, there are 95 projects (apartments)  where 86 of them are located in non-CBD areas, especially in Jabodetabek , apartment property market estimated demand by passive buyers. That meaning is buyers aim to make the apartment as an investment , not on the basis of housing needs.

            Economic conditions in Indonesia, especially which is impact in property business often closely related to the current political conditions. In 1997-1998 , the economic crisis that hit Asian countries has greatly affect for declined in property prices in Indonesia. At that time , values of property ??dropped drastically and inhibit even stopping ongoing progress projects. Mid- year 2013 , the economic turmoil (can not be as a crisis ) in Indonesia was marked by the weakening rupiah due to negative sentiment internally and externally. Political issues related to the 2014 election is also often associated with the economic turmoil that would occur , including the impact on the property market . By looking at the condition of the rupiah weakened in mid-2013 and likely to continue until the end of the year and also the politics issues of Election of 2014 , some analysts predict the rate of growth of real estate business and property prices tend to stagnate. This is due partly because investors tend to hold to buy or sell its assets . However, business of property growth will interest again and property prices will be competitive after Indonesia’s conditions more stable in politic post-elections 2014 .