Moody’s expects the country’s home price index to grow 5 percent next year and 6 percent in 2023. This year, the index is expected to post only about 1.5 percent growth.

This year, the country’s home price index will fall below the 4.42 percent average growth among selected Asia-Pacific countries, but the index is expected beat the forecast regional averages of 3.45 and 3.64 percent growth for 2022 and 2023, respectively.

The housing price index has seen sluggish growth since at least 2015, growing by less than 5 percent year-on-year (yoy) on a quarterly basis, Bank Indonesia (BI) data shows. On an annual basis, growth above 6 percent was last seen in 2014.

Moody’s Analytics economist Sonia Zhu attributed the expected rise in house prices to pent-up demand and favorable real estate investment policies, including low interest rates, tax incentives, and relaxed restrictions on foreign ownerships, all of which would raise demand in 2022 and 2023.

“However, the projected high growth is also due to the low-base effect from 2021. The Delta surge in the third quarter of 2021, lockdowns, and the weak labor market are weighing on the house price index for 2021,” she wrote in an email to The Jakarta Post.

The central bank is expecting housing prices to creep up still more slowly in the July to September period, largely as a result of COVID-19 restrictions imposed in response to a July case surge.

The house price index (IHPR) is expected to grow 1.12 percent yoy in the third quarter, slower than the 1.49 percent yoy growth seen in the April to June period.

Read also: House price growth projected to slow in third quarter

Housing prices are not expected to rise significantly for about a year, according to Ferry Salanto, senior associate director of research at property consulting firm Colliers International.

However, he added, people were keen to reap the benefits of a relaxation of value-added tax (VAT) for houses worth less than Rp 5 billion (US$351,000). The government has extended the relaxation from August to December.

“We have seen in several locations that house sales are quite good, especially if we look at prices affordable to most people, less than Rp 2 billion,” Ferry said in an online press briefing on Wednesday. “[Sales] were better than for houses that were more expensive.”

Sales of houses measuring between 36 and 70 square meters grew by 3.63 percent yoy in the April to June period, dampening the overall decline in house sales, BI data shows. On the whole, house sales contracted by 10.1 percent yoy in the period.

Mortgages for houses measuring between 22 and 70 sq m posted the highest growth of the year in August at 10.33 percent, while those for houses less than 21 sqm contracted 14.23 percent, BI data shows.

“A rise in home prices is possible as long as there is demand and the taxable value of property (NJOP) also rises,” said Wendy Haryanto, executive director of the Jakarta Property Institute (JPI), a nonprofit that facilitates dialogue between the government and real estate firms, on Friday.

However, it would be difficult to predict the types of houses that would drive growth over the next few years, she said.

Real Estate Indonesia (REI) chairman Totok Lusida said developers were not planning to raise house prices in 2022 and 2023, as they wanted to see an economic recovery first. Thus, the association advocates an extension of the VAT discount to December 2022.

“If one or two developers are raising prices, it is because they are already in demand even without incentives,” he said.

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