BTN’s house price index, which was introduced for the first time on Thursday, revealed that housing prices in Riau Islands were the highest of all provinces in the country, followed by the capital.

BTN’s director of strategy, risk and compliance, Mahelan Prabantarikso, said that Riau Islands had Batam — home to many industrial areas and an emerging transport hub — to thank for its high housing prices.

“In Riau Islands, especially in Batam, the price of housing has jumped drastically, which pushed the index up. This is because as the economy in Batam has improved, prices have surged,” Mahelan said during an event to introduce the index in Jakarta on Thursday.

According to Bank Indonesia (BI), in the second quarter of the year Riau Islands recorded 4.51 percent economic growth compared to the same period last year, which was also higher compared to the 4.47 percent growth it recorded during the first quarter.

Meanwhile, BI recorded that Jakarta’s economy grew 5.93 percent yoy in the second quarter, down slightly compared to the growth it recorded during the first quarter at 5.99 percent.

BTN recorded Riau Island’s housing price index at 215.43 in the first half of the year, followed by Jakarta with an index of 189.20. Jakarta was the province with the highest index growth at 11.09 percent year-on-year (yoy).

Meanwhile, the three provinces with the lowest house price index were South Kalimantan, Southeast Sulawesi and West Nusa Tenggara.

Further, Mahelan revealed that 36 square meter homes had become an attractive choice for investors as this segment recorded the highest index at 167.74, with growth of 8.4 percent yoy.

This showed that demand for smaller homes was higher compared to larger properties, he said, which might have occurred because of current consumer purchasing power and increasing demand among the middle to low income segment.

In the first half of 2018, the national house price index increased, reaching 155.26 in June, with a growth rate of 7.23 percent yoy.

BTN’s new house price index aimed to capture the trend of housing prices in Indonesia based on three factors: location, price, and quality, BTN president director Maryono said.

“BTN’s house price index uses real transaction prices of the bank’s house mortgage customers, thus it provides more accurate representations of actual conditions,” Maryono said.

The lender currently dominates the market share for house mortgages in Indonesia, with a 37 percent market share for commercial housing loans and 98 percent for subsidized home loans.

BTN hoped that stakeholders in the property industry could benefit from its house price index, Maryono said. For example, the government can use the index as reference for future policies, while property developers can use the index as a reference for their expansion plans.

Moreover, banks will be able to analyze the housing credit ceiling and expand their home mortgage businesses, and, more importantly, consumers can use the index as a source of information before purchasing a property.

Maryono explained that the BTN house price index was different to BI’s residential property price index, because the central bank used developers’ listing prices, and only covered 18 major cities in Indonesia. Meanwhile, BTN’s index measured transactions in all of BTN’s branch offices across the archipelago.

Maryono estimated that the house price index would continue to rise, despite a slowdown in the growth of housing prices, affected by factors such as supply and demand as well as lending rates.

He projected that the demand for housing in populated provinces such as Central and East Java would remain high as the backlog in the two provinces was still high.

In June, BTN revised down its loan growth target to 19 percent from 21 percent, because of challenges deriving from the current macroeconomic conditions. To match the increase in BI’s seven-day reverse repo rate, BTN has so far raised its lending rates by 50 basis points.

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