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Everything you need to know is included in our Indonesia Property Pack
Are you thinking of investing in property in the Emerald of the Equator? Are you thinking about when to take action?
Everyone has their own viewpoint when it comes to market timing. The Indonesian real estate agent you consulted might advise you that now is the opportune time to buy property, while your childhood friend from Jakarta may suggest exercising more patience before making a decision.
At BambooRoutes, when we create articles or update our pack of documents related to the real estate market in Indonesia, we make decisions based on evidence and trustworthy data rather than subjective opinions or hearsay.
We have carefully studied official reports and statistics from government websites, and we now have a trustworthy database with important information. Here's what we discovered, which can help you decide if it's a good idea to purchase real estate in Indonesia.
We hope this article proves valuable to you.
How is the property market in Indonesia now?
Indonesia offers, today, peace and stability to investors
Neutral
Stability is a necessary condition when investing in real estate because it ensures a supportive economic and social framework. It is an information you need as a foreigner buying a property in Indonesia.
You'll be glad to hear that Indonesia is seen as stable country for investors. The last Fragile State Index reported for this country is 63.7, which is a satisfactory number.
Indonesia offers peace and stability to investors today due to its robust economic growth driven by a young and expanding middle class, which fuels domestic consumption and investment opportunities. Additionally, the government's commitment to infrastructure development and regulatory reforms, such as the Omnibus Law on Job Creation, enhances the business environment and reduces bureaucratic hurdles, fostering investor confidence.
There is a secure base for investment in the country. It's time to analyze the economic forecast.
Indonesia will experience a significant surge in growth
Positive
Make sure the country's economy is strong before deciding to buy a property.
Based on the IMF's outlook, Indonesia will end 2024 with a growth rate of 5%, which is a strong number. As for 2025, the consensus estimate is 5.1%.
That will continue to be true for more years to come since Indonesia's economy is expected to increase by 22.8% during the next 5 years, resulting in an average GDP growth rate of 4.6%.
Projected strong growth in Indonesia indicates a booming economy, which can lead to increased demand for property, potentially driving up property values and rental income. For investors, this means a higher likelihood of profitable returns on their property investments.
In addition, there are other metrics to consider.
Indonesian business owners are more and more enthusiastic about the economic outlook
Positive
While it's valuable to consider the GDP forecast, it's worth noting that a foreign institution (the IMG), creates it, which means it doesn't provide us with information about the sentiments of Indonesians towards their own economy. Fortunately, in Indonesia there is an official metric that is regularly reported. We're lucky because this isn't true for every country.
Derived from surveys and assessments of business leaders, the Business Consumer Index (BCI) serves as a metric to gauge their confidence in the current and future economic conditions.
The Bank Indonesia's data indicates that the Business Confidence Index is currently 15 for Indonesia. For interpretation, this score is remarkably robust.
If we look at the data, we can see that we're on a positive trend, moving upward. The BCI score has increased, 12 months ago it was at 11.
When local businesses in Indonesia exhibit strong confidence about the future, it's excellent news for property investors. It signals a robust economy with more job opportunities and rising incomes. This optimistic perspective boosts demand for properties, offering a prime opportunity for investors to generate rental income and potentially see property values appreciate over time.
Steady and confident expansion of house prices in Indonesia
Positive
Indonesia's home prices have increased by 7.5% in 5 years according to Bank Indonesia.
It means that if you had bought a villa in Bali for $500,000 five years ago, then it would now be worth around $537,000.
These days, the property prices are undergoing a steady and confident expansion, showcasing a consistent upward trend in Indonesia.
It's a positive signal, no doubt about it. Prices have been increasing and probably haven't peaked yet.
You can find a more detailed analysis of the real estate prices in our property pack for Indonesia.
Everything you need to know is included in our Indonesia Property Pack
Indonesia's population is growing and getting richer
Positive
Considering population growth and GDP per capita is essential for making informed real estate purchases because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Indonesia, the average GDP per capita has changed by 8.9% over the last 5 years. It's a satisfactory number. Furthermore, the Indonesian population is growing (+6% in 5 years).
This means that, if you purchase a private villa in Bali and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be an increase in rental demand in Indonesian cities like Jakarta, Bali, or Surabaya in 2025.
No high rental yields in Indonesia
Neutral
Now, let's delve into the rental yield.
It's the annual rental income of a property divided by its price. For example, if a property in Indonesia is purchased for 1,000,000,000 IDR and generates 40,000,000 IDR in annual rental income, the rental yield would be 4%.
Based on the data provided by Numbeo, rental properties in Indonesia promise gross rental yields from 3.0% and 5.7%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Indonesia.
It indicates a moderate level of income generation.
Everything you need to know is included in our Indonesia Property Pack
In Indonesia, expect minimal inflationary effect
Neutral
In two words, inflation is when expenses surge.
It's when your favorite plate of nasi goreng costs 25,000 Indonesian rupiahs instead of 20,000 Indonesian rupiahs a couple of years ago.
If you're considering investing in a property, high inflation can bring you several advantages:
- Property values tend to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, preserving the value of the investment.
- Diversifying into real estate provides stability during inflationary periods.
In accordance with IMF projections, over the next 5 years, Indonesia will have an inflation rate of 1.0%, which gives us an average yearly increase of 0.2%.
This data is telling us that Indonesia is anticipated to experience negligible inflation. Unfortunately, in the absence of inflation, purchasing a property now may not result in substantial price increases or substantial profits in the future.
Is it a good time to buy real estate in Indonesia then?
Now it's time to draw our conclusions.
Indonesia is currently a beacon of peace and stability for investors, and this environment is expected to persist well into the future. With the country's economy projected to grow by 22.8% over the next five years, averaging a GDP growth rate of 4.6%, the economic landscape is set to remain robust. This stability and growth make 2025 an opportune time to consider investing in property in Indonesia. The consistent economic expansion provides a solid foundation for property investments, ensuring that the market remains attractive and secure for both local and international investors.
As Indonesia's economy continues to strengthen, the demand for property is likely to increase, leading to a potential rise in property values and rental income. This booming economy presents a golden opportunity for investors looking to capitalize on the growing market. With the likelihood of profitable returns on property investments, 2025 is shaping up to be a promising year for those looking to enter or expand their presence in the Indonesian real estate market.
The steady and confident expansion of house prices in Indonesia is another compelling reason to consider investing in property by 2025. As the population grows and becomes wealthier, the demand for housing is expected to rise, further driving up property values. This trend not only benefits those looking to sell properties at a profit but also those interested in generating rental income. The growing affluence of the population ensures a steady stream of potential tenants, making property investment a lucrative venture.
Moreover, according to data from Numbeo, rental properties in Indonesia offer gross rental yields ranging from 3.0% to 5.7%. This indicates a healthy rental market with the potential for significant returns. Additionally, the minimal inflationary effect expected in Indonesia means that the purchasing power of investors is less likely to be eroded over time. All these factors combined make 2025 an ideal time to invest in Indonesian property, promising stability, growth, and profitability.
We hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Indonesia.
-Will real estate prices go up in Indonesia?
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.