The government has issued a number of incentives including a higher tax threshold and the reduction of down payment requirements but analysts believe they will not be enough to revive the country’s sluggish property market.

Real estate consulting firm Savills Indonesia research and consultancy head Anton Sitorus said he expected the country’s property market to remain the same this year despite the stimulus as demand would remain week.

He said the stimuli provided by the government and Bank Indonesia (BI) would not have much impact on property sales because the current property prices were still considered too high.

“Those incentives and stimuli are not working at their maximum effort,” he said in Jakarta on Dec. 20, 2019.

Even though the global economy looks to be on the track to recovery, Anton continued that the growth of the country’s property market would heavily depend on how developers devised their pricing strategy.

“I don’t see much change this year because the current prices are already too high,” he said, adding that with the high prices the returns received by investors would be limited.

For commercial property developers, this year will be more challenging because the demand will also remain low especially for retail outlets as many customers have turned to online marketplaces to buy their daily needs and other necessities such as clothes and shoes.

Anton, however, said that as many Indonesians still used malls for recreation, many businesses would rent space to sell food and beverages.

Beginning December last year BI lowered the loan to value (LTV) ratio by 5 percent to between 85 and 90 percent for the purchase of houses between 21 square meters and 70 sq m. With the new LTV ratio, the down payment for the purchase of such houses is reduced to between 10 and 30 percent depending on the policy of the lenders providing the housing loans.

The central bank also lowered the LTV by 5 percent for environmentally friendly housing to 95 percent. This means that buyers will need only pay a down payment of 5 percent.

However, BI’s macroprudential policy department head, Juda Agung, said the relaxed rule was only applicable for
second-time house buyers as the central bank was targeting investors to stimulate the country’s property sector.

“Investors are the ones who drive the property market and the prices,” he said, adding that he projected the policy’s effect to become apparent in March.

Although bankers welcomed the relaxation, not all banks will implement the policy. Bank Central Asia (BCA) president director Jahja Setiaatmadja said the bank would adjust the down payment requirements based on the debtor’s credit profile.

“As long as there’s support from BI, [we will do it] but the implementation will be based on each bank’s lending policy,” he told The Jakarta Post.

The government also launched an additional tax incentive for modest housing across the country by increasing the price threshold of houses that are excluded from value-added tax (VAT). The tax threshold for houses in Java and Sumatra, for example, is set at Rp 150.5 million (US$10,750).

Meanwhile, Tommy Bastamy, the managing partner of Coldwell Banker Commercial, said the property market would be slightly better than last year but that growth would still be below 10 percent,

"Actually, there is still a chance of achieving double-digit growth but it will be difficult,” he told Bisnis.

Meanwhile, the country manager of Rumah123.com, Maria Herawati Manik, said growth in the property sector this year would largely depend on national economic growth and government policies that can stimulate consumer spending.

“I don't anticipate significant growth in property. If it can reach 10 percent, it will be quite good," she told Bisnis recently.

In the industrial estate sector, Colliers International Indonesia associate director of research Ferry Salanto told the Post that there was still hope of growth as a result of the high demand for logistics and warehousing.

The e-commerce industry, along with start-up and technology firms, will also help to drive the growth in office space occupation as those companies are the ones that have experienced significant growth lately, Anton said.

In the meantime, he said, this year property would be more focused on building more residential property, especially for the middle and middle-to-lower markets, which have the biggest market share.

“It will still be centered on the outskirts of the city, as strategic locations, especially in Jakarta, are getting more expensive,” said Anton.

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