INDONESIA PROPERTY WATCH UPDATE

Summary

In this engaging discussion, Ferdinand and property expert Pak Ali Terang delve into the current property market conditions in Indonesia post-pandemic. Despite the global economic uncertainties, including the Russia-Ukraine war and global recession fears, Indonesia's local property market remains resilient, driven primarily by domestic buyers. They emphasize the importance of long-term investments in property, noting that although political events like elections may temporarily slow down market growth, the sector's fundamentals remain strong. Pak Ali advises that it's always a good time to invest in property, especially for those with available capital, as the market continues to recover.

Takeaways

• 😀 The property market experienced an unexpected boom during the pandemic, particularly in the upper-middle segment, while the lower-middle segment faced challenges.
• 😀 Despite economic difficulties globally, Indonesia's property market remained relatively stable due to strong local demand.
• 😀 Economic growth in Indonesia post-pandemic was modest, primarily driven by government spending on infrastructure, not by sector-specific growth.
• 😀 The global geopolitical tensions, such as the Russia-Ukraine conflict, did have some impact on global markets, but Indonesia’s economy showed resilience.
• 😀 Inflation in Indonesia is under control, with local economic systems more focused on redistribution and public spending.
• 😀 The property market in Indonesia has a robust local consumer base, with about 98% of purchases coming from locals rather than foreign investors.
• 😀 Many Indonesians are known for being frugal, which helps cushion the economy against global price hikes, such as those seen in food prices.
• 😀 The market is likely to face a slowdown due to the upcoming 2024 election cycle, as political uncertainty often causes hesitation in investment decisions.
• 😀 The current phase in the property market could be an ideal time for investments, especially for those with savings, as prices are relatively stable.
• 😀 Long-term property investment in Indonesia remains a safe bet, with values steadily increasing over time, despite short-term political and global economic challenges.

Q & A

What is the impact of the pandemic on the property market in Indonesia?

During the pandemic, the property market experienced an anomaly where the middle-upper segment saw an increase in sales, while the lower segments faced stagnation. This trend continued even as the economy began to recover, with a shift in focus toward the mid-lower segments.

Why is the local market important for the Indonesian property sector?

The local market plays a crucial role in Indonesia's property sector, as nearly 98% of property buyers are local. Despite global economic challenges, the strength of the local economy, such as controlled inflation and government spending, helps maintain stability in the property market.

How does political instability affect the property market?

Political events, such as the approaching election in 2024, can cause market slowdown. As the economy enters a period of uncertainty, investor confidence may waver, resulting in reduced property market activity. This effect is commonly observed during election periods.

What makes property a safe long-term investment?

Property is considered a safe long-term investment because its value tends to appreciate over time, even though short-term fluctuations may occur due to political or economic factors. It's a stable asset that usually provides long-term returns.

Is it a good time to invest in property right now?

While there may be concerns about market volatility, investing in property can be a good idea if you have the financial means. The market might not experience rapid growth in the short term due to political factors, but the long-term outlook remains positive.

How does the global economic situation, such as the war in Ukraine, affect Indonesia's property market?

While global economic issues like the Russia-Ukraine war may have some indirect effects, Indonesia's property market is largely driven by local demand. This reduces the impact of global recessions or geopolitical conflicts on the sector.

What role does government spending play in Indonesia's property market?

Government spending, particularly on infrastructure projects like toll roads and other public works, has a significant influence on the economy. This spending helps maintain economic growth, which in turn supports the stability of the property market.

How do property market trends change after significant global crises, like the 2008 financial crisis?

After major global crises, such as the 2008 financial meltdown, the property market can experience significant psychological impacts, with tighter bank lending and rising interest rates. However, the Indonesian market has proven to be resilient due to its strong local fundamentals.

What segments of the property market are currently underperforming?

The lower-end property market, specifically those under 500 million IDR, is still underperforming. While there is some growth in the mid-range segment (500 million to 1 billion IDR), it has not yet recovered significantly.

How does local cultural behavior, such as saving and community support, help buffer economic shocks in Indonesia?

Indonesian society's strong focus on saving and community support helps mitigate the effects of price increases, particularly during tough economic times. People tend to find ways to cope with inflation by helping each other and adapting to changing circumstances.