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Indonesia Real Estate Report Q1 2011
Business Monitor International, Dec 2010, Pages: 71
Business Monitor International's Indonesia Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Indonesia's Real Estate industry.
Indonesia’s economy continues to strengthen. We have upgraded our forecast for Indonesia's real GDP growth from 5.2% to 5.8% for 2010 on account of strong Q310 growth data. We believe that factors will remain supportive for domestic demand, and we project real GDP growth to reach 5.9% in 2011.
Among all the countries whose real estate sectors are profiled by BMI, Indonesia stands out in that a rerating of property has resulted in a sharp rise in commercial rentals. This rise has taken place in all three sub-sectors and in each of the three centres – Jakarta, Bandung and Denpasar/Bali – for which we have gathered data. For the time being, we can see no reason why this re-rating cannot continue. In due course, there will likely also be an increase in prices and capital values.
As Indonesia experiences favourable conditions – a growing economy, a large population and relative political stability – there has been a substantial improvement in the way the various actors in the commercial real estate sector, including foreign investors, perceive the risks of doing business in Indonesia. Although Indonesian assets have been re-rated upwards, the immediate impact of the surge in rental rates has been an increase in yields.
In the residential sector, however, demand for luxury residential property – both purchases and rentals – has been weak since the end of 2009, and has been stagnant during 2010.
Indonesia had been set to change its property laws to allow foreigners to directly own real estate. In late March 2010, the Investment Coordination Board of Indonesia announced that it would end the ban on foreigners directly owning property. However, the government has backtracked on this commitment. Now, although the market will be liberalised to some extent, foreigners will still not be permitted to own property outright. Yet, it will become simpler for foreigners to purchase leaseholds of up to 70 years in duration. The changes may be delayed for some time, as they require parliamentary approval.
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