Capital gains: Indonesia’s economic growth and real estate boom fuel development

Local government’s efforts to attract foreign investment seem to pay off

The Indonesian economy is growing at a swift pace, with its Gross Domestic Product (GDP) rising to a nine-year high in 2022. The country’s strong economic growth is expected to have a significant impact on the property market, as investors look to take advantage of the boom. 

According to Hurriyet Daily News, the country’s GDP rose by 6.9 percent in 2022, the highest since 2013. This growth was largely driven by an increase in government spending, as well as a surge in exports and investment. The demand for property is also likely to increase as more consumers are able to afford to buy or rent homes. 

This is good news for property developers—namely major winners at the 2022 PropertGuru Indonesia Property Awards: Agung Sedayu Group (Best Developer), Triniti Land (Best Lifestyle Developer), PT Logos SEA Indonesia (Best Sustainable Industrial Developer and Best Industrial Building Developer), and Central Group (Best Emerging Developer)—who are likely to see a surge in demand for their products. 

“Tax relaxation, infrastructure developments, and the lifting of social restrictions have proven to have a positive impact on the Indonesian property market,” said Vivin Harsanto, the senior director/head of advisory at JLL Indonesia, as well as the chairperson of the PropertyGuru Indonesia Property Awards independent panel of judges. 

In the Q4 report published by Colliers International on Jakarta and Bali’s properties, there is a growing demand for the residential and commercial sectors. In the current capital, the residential property sector recorded a 0.9 percent increase in average price per square meter (sqm) quarter-on-quarter, while in the leading beach destination, the commercial property sector recorded a 2.5 percent QoQ increase in average price per sqm. 

The report also highlighted the continued strong demand for co-living and co-working spaces. With more people working from home and the rising cost of office spaces, these types of properties are becoming increasingly popular.  

Rumah.com also released its Q1 2023 Indonesia Property Market Report, revealing a positive outlook for the market. The residential property sector, for one, recorded a 3.7 percent increase in the asking price for houses compared to the last quarter of 2022. The report also showed that demand for apartments and landed houses remains strong.  

“We have seen a lot more activities this year compared to last year, however, we are also anticipating some wait-and-see towards the end of the year due to the upcoming election next year,” added Harsanto. 

While the property market is generally booming, there are still some concerns about the relocation of the country’s capital from Jakarta to a new site in East Kalimantan, in a bid to ease overcrowding and pollution in the capital. 

According to Reuters, investors are worried that this capital relocation project could have a negative impact on the property market, mainly that it could lead to a glut of properties in Jakarta, as people sell off their homes in the city and move to the new capital. 

Despite these concerns, President Jokowi remains optimistic about the project’s potential. In an interview with Asia Nikkei, he shared his vision to transform the new capital into a fintech hub, attracting investment and creating jobs in the tech sector. 

Overall, the strong economic growth in Indonesia bodes well for the property market. With the demand for property rising, developers are likely to see a surge in business. However, the success of the country’s new capital project remains to be seen, and investors will need to carefully monitor the situation to make informed decisions about their investments.  

Heard of award-worthy residential, commercial, or industrial projects in Indonesia? Nominate them for the 9th annual PropertyGuru Indonesia Property Awards on or before 7 July 2023. To know more, visit AsiaPropertyAwards.com/Award/Indonesia/. 

Gynen Kyra Toriano, Digital Content Manager at PropertyGuru, wrote this article. For more information, email: [email protected].