Jakarta. 2020 is expected to be a good year for the Indonesian property market after the government loosened up the loan-to-value ratio on residential properties by 5 percent and issued an exemption on luxury tax increment for residential properties valued under Rp 30 billion – around $2.2 million – at the end of 2019.
"The 2020 property market will continue to be a buyer's market, the right time for consumers to buy property," Rumah.com country manager Marine Novita said, citing data from the Rumah.com Indonesia Property Market Index (RIPMI) in a statement on Monday.
Marine said Indonesia is entering a more stable political and economic climate in 2020 after the topsy-turvy election year in 2019. "The property market will no longer take a 'wait and see' approach. Both prices and supplies are expected to increase in 2020," she said.
The RIPMI index has the demand for both landed houses and apartments measured at 112.1 in the fourth quarter of 2019, edging up 0.3 percent from the previous quarter. Compared to the fourth quarter of 2018, the year-on-year growth was at 7 percent.
The apartment price index in the fourth quarter of 2019 recorded a 1 percent increase from the previous quarter to 115.4. This increase shows signs of recovery following price declines in the previous two quarters.
Quarterly data show apartment prices grew only slightly over the past two years. This reflects the dynamics of the apartment market in areas where supply is plentiful.
Jakarta, for example, recorded a decrease in the price index in the fourth quarter of 2019 of 1 percent (quarter-on-quarter) and 2 percent (year-on-year).
This quarterly property supply cycle can be seen from the national supply index for apartments. In the fourth quarter of 2019, the apartment supply index was at 106.7, down 1 percent from the previous quarter. The index was dominated by the country's largest apartment suppliers such as Jakarta (66 percent), West Java (12 percent) and Banten (10 percent).
According to Marine, the stagnation in the apartment price index from year to year is not always due to saturation in the apartment market. One contributing factor could be the targeting of new market segments by developers who inevitably lead to moderation and price adjustments.
"The apartment market is seeing an opportunity for expansion. Around 5-10 years ago, apartments were sold as a lifestyle commodity. Now, apartments are being sold to various groups, not only the upper-middle class, but also the lower-middle class," Marine said.
Areas where apartments command a high median price have been showing more price adjustments. This is because of the surge in supply in those areas. This market dynamics can be seen for example in Ciumbuleuit and Dago in Bandung, West Java, where the median apartment price is higher than in other areas in Bandung.
Ciumbuleuit and Dago command a median apartment price of Rp 18.6 million per square meter and Rp 17.2 million per square meter respectively, higher than the median apartment price in the city of Bandung itself, which hovers at Rp 16.9 million per square meter.
But along with the overall fall in the apartment price index in the fourth quarter of 2019, Ciumbuleuit also experienced a decline in the index of 7 percent year-on-year while Dago recorded 4 percent.
Property supply indexes in both areas during the same quarter showed that prices had fallen in line with an increase in apartment supply. The Ciumbuleuit supply index rose 2 percent in the same period in 2018, while Dago recorded a more significant increase of 23 percent (year-on-year).
A similar trend was observed in Depok, another urban area in West Java, where the apartment price index in Margonda, an area that commands a higher median price than Depok, fell by 1 percent year-on-year, but in the same period there was a significant increase in the supply index of 32 percent year-on-year.
"This shows that optimism for apartment sellers remains high in areas with higher median prices. However, the apartment supply has shifted to a lower market with higher supply. So even though prices have fallen, the amount of available supply continues to increase," Marine said.
One of the factors driving the supply of affordable apartments and adjustments in apartment prices is the increased interest in landed property in suburban areas. This is largely driven by infrastructure development in and around big cities.
According to Marine, as a lifestyle commodity, the main attraction of an apartment is its often strategic location near the city center. However, as infrastructure development picked up pace recently, consumers are starting to consider buying a home far from the city center.
New toll roads and public transportation networks have encouraged home seekers to start considering landed houses on the outskirts of the city. "This has caused apartment sellers to reformulate their selling points and main attractions. To compete with suburban landed houses, apartment prices have to be adjusted," Marine said.