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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 is, today, a relatively stable country
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.
These days, Indonesia is experiencing a notable degree of stability. The last Fragile State Index reported for this country is 66.6, which is an acceptable number.
Indonesia has a strong commitment to democracy, and the country has made significant progress in recent years in promoting economic and political stability. The government has also taken an active role in addressing corruption and inequality, helping to create a more secure environment for businesses and citizens.
Let's examine other data now to see if it's the right moment to purchase property in this country.
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 2023 with a growth rate of 5%, which is a strong number. For 2024, 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 22.5% during the next 5 years, resulting in an average GDP growth rate of 4.5%.
Indonesia's projected strong growth indicates that it is a strong and stable economy, making it an attractive investment opportunity for property investors. As the economy continues to grow, property prices are likely to increase, providing investors with a good return on their investment.
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 21 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 14.
When local businesses in Indonesia are filled with confidence about the future, it's great news for property investors. It indicates a thriving economy with increased job opportunities and higher incomes. This positive outlook creates a higher demand for properties, presenting a favorable time for investors to earn rental income and potentially witness property values rise 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 (+2% 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 2024.
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 moderate 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 12.8%, which gives us an average yearly increase of 2.6%.
This data is telling us that Indonesia could face inflation in the near future, which would lead to an increase in prices. Consequently, purchasing a property could become more expensive. However, if you buy now, there is a chance that your investment will appreciate, allowing you to sell it at a higher value in the future.
Is it a good time to buy real estate in Indonesia then?
Now it's time to draw our conclusions.
There's no doubt that 2024 offers a highly auspicious moment for property investment in Indonesia, driven by a convergence of compelling signals that underscore the potential for a lucrative investment environment. The anticipated surge in growth positions Indonesia as a hotspot for opportunities. As the country actively pursues economic expansion, property investors stand to benefit from a thriving market with increasing property values and potential returns.
The growing enthusiasm among Indonesian business owners about the economic outlook further supports the idea of a favorable investment climate. A positive sentiment among business leaders often reflects an environment ripe for investment and growth, creating an environment conducive to profitable property ventures.
The steady and confident expansion of house prices in Indonesia is a strong indicator of market health. This upward trajectory signifies demand and potential capital appreciation, offering investors the prospect of achieving both rental income and long-term value growth from their property holdings.
Indonesia's expanding population and increasing wealth underscore the attractiveness of property investment. As incomes rise and the population grows, the demand for housing can surge, contributing to a buoyant real estate market with both rental and appreciation potential.
Even with neutral signals such as moderate inflation and relatively stable conditions, the overall investment landscape remains compelling. The projected growth, positive business sentiment, rising property values, and demographic trends collectively make 2024 an ideal time to consider property investments in Indonesia, offering a balanced opportunity for both short-term returns and long-term growth.
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.
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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.
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