Residential Property Inventory

Regions undergoing strategic infrastructure development have been at the forefront of residential housing inventory growth throughout 2024. Some key highlights include:

• DI Yogyakarta recorded the highest inventory growth in Java at 281%, supported by the Solo-Yogya-YIA Kulonprogo Toll Road.

• North Sumatra led Sumatra’s inventory growth with a 122% increase, driven by the completion of four new sections of the Trans-Sumatra Toll Road.

• East Kalimantan, as the national capital (IKN), saw the highest inventory growth in Kalimantan at 118%.

Home Buying Demand

Home purchase searches in 2024 grew evenly across all segments, with the modest house segment leading annual growth at 149%. In terms of transactions, particularly in Jabodetabek, Depok recorded the highest growth in the lower-middle house segment, increasing 340% compared to 2023. Meanwhile, the upper-middle house segment saw a significant surge in East Jakarta (433%) and Depok (179%).

Property Financing Transactions

Throughout 2024, BI interest rates fluctuated, rising from 6.00% to 6.25% in April before dropping back to 6.00% in September. Despite economic volatility, mortgage (KPR) and apartment loan (KPA) transactions achieved 60% annual growth. Amid this trend, KPR Take Over remained the top choice for consumers, accounting for 63% of total property financing transactions throughout the year.

The Impact of 2024 Presidential Election on Luxury Housing Demand and Property Purchase Financing

The Presidential Election in Indonesia has a significant impact on the property market, as reflected in the dynamics of home purchase search trends. In quarter 1 of 2024, during the election, searches for modest and middle houses increased by 33% quarter-over-quarter. This growth was significantly higher compared to the 5% growth in searches for luxury houses during the same period. This trend indicates that, amid political uncertainty, the public prefers more affordable property options to mitigate the risks of large investments.

Following the announcement of the presidential election result in quarter 2 of 2024, searches for luxury houses surged by 30% compared to the previous quarter, five times higher than the growth in searches for modest and middle houses. This trend suggests that the surge was not influenced by seasonal factors, considering that in the second quarter of 2023, property searches actually declined due to Ramadan and preparations for the new school year. It also reinforces the notion that the public tended to postpone luxury houses purchases in the first quarter of 2024 and felt more confident searching for luxury houses after political stability and the economic outlook became clearer after the announcement of election results.

Furthermore, the presidential election also impacted property purchase financing, especially Home Ownership Loans (KPR) and Apartment Ownership Loans (KPA). In the second quarter of 2024, KPR and KPA transactions increased by 10% quarter-over-quarter.

The surge in interest in luxury properties and the increase in property purchase financing are allegedly triggered by the reduction in political uncertainty and greater clarity regarding the new government’s economic policies. The consistency and transparency of these policies are expected to boost consumer confidence and support the recovery of the property market in the coming quarters.

Since its launch on 28 August 2023, LRT Jabodebek has improved connectivity in East Jakarta, Bekasi, and Depok area. The strategic rail line connecting Harjamukti to Dukuh Atas not only facilitates public mobility, but also generates significant interest in properties along the LRT route. This enhanced access has become a key factor driving increased public interest in purchasing houses in the area.

Lower-Middle and Upper-Middle Houses as the Preferred Housing Segments in Areas Along the LRT Lane

The development and operation of LRT have had a positive impact on property transactions, particularly in the lower-middle and upper-middle housing segments. According to internal data, Depok recorded the highest growth in house purchase transactions in the lower-middle housing segment, increasing by up to 340% in 2024 compared to 2023. Meanwhile, the upper-middle house segment experienced significant growth in East Jakarta and Greater Bekasi, with year-over-year increases of 433% and 68%, respectively. In Depok, this segment also saw a notable rise of 179%.

We observed that the impact of LRT infrastructure tends to not affect the modest and luxury houses segment. The availability of modest houses (priced under 200 million rupiah) is relatively limited in East Jakarta, Depok, and Bekasi City. This results in the LRT having a minimal impact on this segment. On the other hand, luxury house owners generally rely on private vehicles for mobility.

Opportunity to Rent Out Owned Property

In addition to being used as personal residences, property owners also have the opportunity to generate additional income by renting out their houses. This is supported by data showing a significant increase in house rental searches in 2024, with Cimanggis experiencing the highest annual growth at 294%, followed by Greater Bekasi at 153% and East Jakarta at 135%. This surge reflects the high demand for rental housing in areas connected to the LRT.

Search trends based on building size in 2024 also show variations across different regions. In East Jakarta, searches for houses with a building area less than or equal to 54 square meters increased by 176% year-over-year. Meanwhile, in Cimanggis, houses with type 55-120 were highly sought after, with a growth rate of 364%, indicating a strong preference for larger houses. In Greater Bekasi, searches for houses with building area greater than 201 square meters also surged by 302% compared to previous year.

The Impact of the VAT Exemption Policy on Home Purchase Growth in Indonesia

The 100% Value Added Tax (VAT) Exemption incentive has been extended again by the Indonesian government from 1 September 2024 until 31 December 2024. This policy is a strategic step to accelerate growth in the property sector towards the end of the year. Previously, the 100% VAT incentive was applicable until June 2024, before being reduced to 50% until December 2024. The 100% VAT incentive was first introduced in November 2023 as an initial effort to stimulate the property market.

Since the first announcement of 100% VAT Exemption for houses priced under 2 billion rupiah in November 2023, internal data has recorded an average monthly home purchase growth of 54% from Q4 2023 to Q4 2024, compared to the period before the policy took effect, namely Q1 to Q3 2023.

Meanwhile, the average monthly home purchases for houses priced over 2 billion rupiah remain stable, with a moderate increase by 8%. These findings indicate the positive impact of the free VAT policy in enhancing housing accessibility for the middle class, while also maintaining growth in the premium property segment.

The extension of the 100% VAT Exemption incentive has also contributed to an increase in new additional inventory, particularly in the below or equal to 2 billion rupiah segment. In 2024, the additional inventory of houses in this category saw a significant surge of 418% compared to 2023. This growth reflects the positive response from property developers, who are leveraging the tax incentive to meet the needs of home seekers looking for VAT-exempt housing.

The Growth of Property Purchases Financing After The Reduction of BI Benchmark Interest Rate

At the end of Quarter 3 of 2024, Bank Indonesia took a strategic step by lowering the benchmark interest rate from 6.25% to 6.00%. This policy continued through Quarter 4 of 2024. The decrease in the benchmark interest rate had a positive impact on the increase in property purchase financing, particularly for Home Ownership Loans (KPR) and Apartment Ownership Loans (KPA). Based on the collected data, the growth of KPR and KPA transactions in quarter 4 of 2024 reached 58% compared to previous quarter.

Meanwhile, the number of Take Over transactions remained stable quarter-over-quarter, indicating that even though there was an increase in primary property purchase financing, consolidation or credit-transfer activities did not undergo significant changes.

Changes in Consumer Behavior Toward Long-Term Fixed-Rate Financing Schemes

From a consumer behavior perspective, the trend shows a pattern consistent with the previous quarter. Consumers tend to prefer long-term fixed-rate financing to maintain installment stability and reduce the risk of future payment increases. This trend is driven by a more stable economic environment and a decline in benchmark interest rates.

This shift is reflected in the increased preference for long-term fixed-rate financing (15-year tenor), which more than doubled quarter-over-quarter. It indicates a greater level of consumer confidence in long-term stability within the property financing system and a more cautious approach to managing long-term financial obligations.

Meanwhile, the proportion of short-term fixed-rate financing decreased by -18% compared to the previous quarter. Consumers have begun to avoid the higher rate fluctuation risks of short-term financing, opting instead for longer tenors.

Sustainable Growth in Property Market One Year After the Launch of the Whoosh High-Speed Railways

The Whoosh Jakarta-Bandung High-Speed Railway, launched in October 2023, has had a significant impact on the connectivity between Jakarta and Greater Bandung. This mode of transportation effectively shortens the Jakarta-Bandung travel time to about 40 minutes, with main stations in Padalarang and Tegalluar that directly connect to the hearts of Bandung City and its surrounding areas.

One year after its launch, the Whoosh High-Speed railways has driven an increase in property demand, whether for purchase or rent. Interestingly, Cimahi City recorded the highest surge in house rental searches, at 195% compared to previous year, followed by West Bandung Regency with a 177% increase. Moreover, growth has also been evenly distributed in other areas of Bandung, such as Bandung Regency (163%) and Bandung City (139%).

Furthermore, houses of type 121-200 in Cimahi and West Bandung have shown the highest annual growth in house rental searches, each experiencing a fourfold increase. This phenomenon indicates that large-type houses have become the primary target in the property market in this area.

Inauguration of the New Government: Initiation of the 3 Million Houses Program and Boost for National Strategic Projects

The inauguration of the new president in 2024 marked the start of the 3 million houses program, which aims to reduce the housing backlog that has reached millions of units. This initiative is expected to create significant opportunities for developers and the public to obtain adequate housing.

Additionally, President Prabowo Subianto emphasized accelerating National Strategic Projects and Special Economic Zones, targeting their completion by 2024-2025. This development has the potential to increase demand for residential properties in the surrounding new economic areas.

The 3 Million Houses Program: Development Focus and Market Response

The 3 Million Houses Program, initiated by the new government, targets the construction of three million houses per year for Low-Income People (MBR) whose income is below 8 million rupiah per month. To achieve this target, the government has prepared several strategies, including the utilization of 1,000 hectares of land in Banten, the optimization of 1.3 million hectares of abandoned land identified by the Ministry of Agrarian Affairs and Spatial Planning/National Land Agency (ATR/BPN), and the use of state-owned, regionally owned, and other government assets for public housing in the form of apartment complexes (Rusun).

As an initial step in implementing the program, on November 1, 2024, the Ministry of Housing and Residential Areas (PKP) launched the National Mutual Cooperation Movement to Build Houses for the People through the groundbreaking of free rusun construction for MBR in Sukawali Village, Pakuhaji, Tangerang Regency, Banten. This initiative marked the government’s commitment to accelerating the supply of adequate housing, particularly for those in need. The need for modest housing in Tangerang Regency is reflected in the surge in demand for houses priced under 200 million rupiah in several districts, such as Sepatan, Pasar Kemis, and Rajeg, with a 120% year-over-year increase.

The development of this program is also planned to cover coastal areas, with a target of one million houses each in rural, urban, and coastal regions. Internal data show an increase in demand for modest houses in several coastal cities, including Bandar Lampung City (593%), Balikpapan City (555%), Sukabumi Regency (292%), and Malang Regency (265%). Observing this trend, these areas, with high surges in demand for modest houses, could become a priority for the government when determining locations for the 3 Million Houses Program, so that the distribution of subsidized housing aligns with public needs.

Modest House Inventory Availability

Amid efforts to accelerate development, some areas have shown dominance in modest house supply. Internal data indicate that in 2024, Bekasi Regency, Bogor Regency, and Tangerang Regency were the top three regencies with the largest modest house inventory, with annual growth of 79%.

Meanwhile, Karawang Regency is starting to show significant potential in the modest house market, with an annual inventory growth of 447% in 2024. Karawang’s appeal continues to grow with the operation of the Jakarta-Bandung High-Speed Rail Station beginning in December 2024. Supported by a BPHTB exemption policy that reduces costs by up to 5% of the house price for Low-Income Communities, Karawang has the potential to become a residential option while also opening up long-term investment opportunities.

Extension of the VAT Exemption Program Until December 2025

Besides the 3 Million Houses program, the extension of 100% VAT Exemption (PPN DTP) from January to June 2025 and 50% from July to December 2025 also provides a significant boost to the property market, particularly in the primary housing segment with prices below 2 billion rupiah. This program has proven to increase average monthly purchases of houses priced under 2 billion rupiah at 54% from Quarter 4 2023 until Quarter 4 2024, compared to the period before the policy took effect, namely Q1 to Q3 2023.

In 2025, extending this program is expected to continue the positive trend, especially focusing on first-time homebuyers who benefit the most from the reduced tax burden. This policy also provides additional incentives for developers to increase the inventory of new homes in affordable price segments.

Continued BI Rate Reduction Throughout 2025

The BI Rate reduction in September 2024 (from 6.25% to 6%) had a positive effect on property financing transactions in Quarter 4 of 2024. Internal data shows an increase of 58% in financing transactions using KPR/KPA in Q4 2024 compared to Q3 2024.

This positive momentum continued with the announcement of a further BI Rate reduction on January 15, 2025, from 6% to 5.75%. If the downward trend of the BI Rate persists, the potential for lower loan interest rates will further strengthen purchasing power, especially through Home Ownership Loans (KPR). Based on historical trends, property financing transactions through KPR/KPA are expected to continue strengthening throughout 2025.

The Continuation of Trans-Sumatra Toll Road Development

Coinciding with the one-decade milestone of the assignment to develop the Trans-Sumatra Toll Road (JTTS) through Presidential Regulation Number 100 of 2014, this toll road has cumulatively reached 1,042 km, crossing eight provinces on the island of Sumatra. In 2024, an additional 83.9 km of toll road was built, and construction continues with a target of 3,000 km. With improved connectivity, it is hoped that new economic areas will emerge and attract developers’ interest in residential housing. This reflected positive growth on total inventory of houses for sale in the provinces along the JTTS including Riau (143%), Lampung (132%), and North Sumatra (123%).

Along with the progress of JTTS development, North Sumatra stands out as the province that inaugurated the most toll roads throughout 2024. It is recorded that four new toll road sections in North Sumatra have been successfully inaugurated, namely the Indrapura - Lima Puluh Toll Road, the Kutepat Toll Road (Section 1, part of Section 2, and Section 3, part of Section 4), and the Kuala Bingai - Tanjung Pura Toll Road. The inauguration of these toll roads boost buyer interest in North Sumatra, as the home purchase searches grow in 2024 up to 193% increase year-over-year. This step aligns with the hope that enhanced connectivity not only attracts developers interest but also increases demand on residential housing.

Long Term Opportunities on Property in Bali

Meanwhile, development of MRT and LRT in Bali that started in September 2024, although it is predicted to finish at least in 2031, offer interesting opportunities for investors searching for properties near public transportation access. This project not only improves public mobility, but also attracts tourist interest, which in turn can drive the growth of the hospitality and residential sectors, particularly in the luxury housing segment.

This infrastructure growth has potential to encourage developers and property owners to increase luxury house supply. Internal data show that since the beginning of 2024, premium housing inventory in Bali was consistently increasing, with the highest growth in Quarter 3 2024 at 96% quarter-over-quarter. This surge coincided with the beginning of MRT and LRT construction, indicating positive response from the market toward the development of infrastructure that have potential to increase investment value in the future.

As supply increases, demand for luxury houses in Bali has also begun to show a recovery trend from December to January, after a decline in October and November. This indicates that prospective buyers and investors are becoming more optimistic about the outlook of Bali's property market, particularly in the luxury housing segment. With a wider range of property options and continued infrastructure development, Bali is further strengthening its position as a promising property investment destination.