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Millennials struggle to purchase houses as prices keep soaring
As property and house prices keep soaring in the Greater Jakarta area, it is getting harder and harder for young middle-class workers to buy a place of their own
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s property and house prices keep soaring in the Greater Jakarta area, it is getting harder and harder for young middle-class workers to buy a place of their own.
Even though many millennial workers want to purchase property, budget constraints and high property prices are becoming major obstacles. Buying a property could even be a lifetime process for them, as they would need to purchase it in installments over decades.
Taufik Agung, a 26-year-old private employee in Central Jakarta has no option but to buy a house in his hometown of Purwokerto (Central Java), instead of in Greater Jakarta, as he found that house prices in Greater Jakarta were very expensive for him, even for a small house.
“Actually house prices in Purwokerto are expensive too, although they are not as expensive as in Jakarta. So, I still need to save up money for the down-payment anyway,” he said on Friday.
“For the mortgage, I estimate it could take around 15 or 20 years,” he said.
Taufik plans to buy a house for around Rp 300 million (US$21,600) in Purworketo, and said the price for a house of the same size in Greater Jakarta could be as much as Rp 500 million.
Meanwhile, for Ditty Lulu, 27, a marketing manager at a private company in South Jakarta who wants to buy a house in Depok, the most challenging obstacle is applying for a mortgage, aside from the high prices.
“For an umarried woman such as myself, it is more difficult as banks prefer to give mortgages to married couples. I have tried to apply for a mortgage in three banks but none of them accepted my application,” she said on Friday.
Ditty also said she had to deal with property salespeople treating her differently after finding out she is a single buyer.
“I think unmarried millennials are not their market priority, I can see it from how they treat me compared to how they treat couples,” she said.
Ditty has found a house which is suitable for her current budget in Depok, West Java. With a price range of around Rp 600-700 million, she plans to take out a 20-year mortgage to pay for the house.
“Now, I am still struggling to get the mortgage, this has been my biggest anxiety this year,” she said.
According to a survey published in 2017 by rumah123.com and karir.com, 46 percent of productive Indonesians aged 23-38 years old have an average monthly income of Rp 4 million or less, meanwhile 34 percent have a monthly income of Rp 4-7 million, followed by 14 percent with a monthly income of Rp 7-12 million.
Ignatius Untung, a property expert and rumah123.com country general manager, said to buy a house at a price of Rp 400 million, using a mortgage with a loan tenor of 20 years for example, a millennial would need to earn at least Rp 8.6 million per month to pay the mortgage installment every month. This is because the monthly installments for a mortgage are often 30 percent of monthly income.
“That’s why there are many millennials who intend to buy a house. But it turns out it is difficult for them to purchase one,” he said, adding that property prices increased by 12 percent on average every year, while incomes increased by around 10 percent or less every year.
According to Bank Indonesia’s survey in 2017, 76 percent of house buyers in Indonesia still rely on bank loans to purchase houses, indicating that few Indonesians can afford a house with full up front payment.
Rosan P. Roeslani, Indonesian chamber of commerce and industry (Kadin) chairman said Indonesia needed a government policy that could help the middle-lower class, especially millennials, to afford housing.
“Many policies and schemes could be implemented by the government to support millennials in buying a house, for example by giving an interest rate subsidy for millennial mortgage applications. It also could be in the form of a down-payment installment policy and tax incentives,” he said on Thursday.
Rosan said supportive policies would not only help middle-class millennials to afford a house, but could also stimulate business property to grow. He also said it was time for the government to make extra effort beyond policies to help the people.
Meanwhile, financial technology (fintech) firms such as Gradana are trying to step up the game by providing peer-to-peer lending for millennials specifically for paying the down-payment for property.
“We see that many millennials have difficulty paying the house down-payment. They can afford the monthly installments, but unfortunately, many of them cannot afford the down-payment, so we try to help,” said Gradana commissioner Freenyan Liwang on Thursday.
Seeing the common problem, fintech alone offers loans for property down-payments with a tenor of up to 36 months.
Moreover, developer Summarecon Agung tried to offer several packages that could attract millennials, although they are not specifically for millennials.
“We do not have a product that is specifically designed for millennials, because we try to accommodate a wider segment. However, we offer property packages in which the down-payment could be paid over 18 installments, as well as credit with a long tenor of up to 25 years,” said Summarecon president director Adrianto P. Adhi on Thursday.
