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Indonesia's residential property market presents a complex landscape of opportunities and challenges as of September 2025.
The major cities of Jakarta, Bali, and Surabaya each display distinct pricing patterns, with Bali continuing to outperform national averages while Jakarta and Surabaya show more moderate growth trajectories. Understanding these market dynamics is crucial for both investors and those considering relocation to Indonesia.
If you want to go deeper, you can check our pack of documents related to the real estate market in Indonesia, based on reliable facts and data, not opinions or rumors.
Indonesia's property market shows moderate growth with rental yields often exceeding regional Southeast Asian averages, particularly in Jakarta and Bali.
While price appreciation remains subdued nationally at 1-2% annually, Bali continues to see strong double-digit growth in prime areas.
| Key Metric | Current Status | Forecast |
|---|---|---|
| National Price Growth | 0.9-1.1% annually | 2-3% next 12 months |
| Average Rental Yield | 7.15% nationally | Stable to improving |
| Mortgage Interest Rate | 6.87% | Expected to drop to 4.5-5.5% |
| Urbanization Rate | 58-60% | 1-2 million new urban residents annually |
| Foreign Investment | Growing steadily | Expected to accelerate with Nusantara development |
| Market Risks | Moderate | Oversupply in mid-range segments |
Fact-checked and reviewed by our local expert
Daniel Rouquette 🇫🇷
CEO & Co-Founder at Villa Finder
What are the current average prices per square meter in Jakarta, Bali, and Surabaya?
Jakarta's residential property market shows significant variation depending on location and quality.
The citywide average price stands at approximately IDR 35.7 million per square meter, equivalent to around USD 2,190. Prime Central Business District areas command much higher prices, reaching IDR 52.9 million per square meter (USD 3,240). Non-prime residential areas offer more affordable options, typically ranging from IDR 27-32 million per square meter (USD 1,670-1,960).
Bali's property market reflects its status as a premium destination for both tourists and expatriates. Prime areas such as Canggu and Berawa average USD 1,000-2,000 per square meter. Luxury beachfront locations and exclusive developments can exceed USD 3,300 per square meter, making Bali one of Indonesia's most expensive residential markets.
Surabaya presents the most affordable option among Indonesia's major cities. The average residential property price sits at IDR 20 million per square meter, roughly USD 1,200. This represents consistent nominal growth over the past eight years, making Surabaya an attractive option for budget-conscious investors and residents.
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How have property prices changed in Indonesia over the past five years?
Indonesia's residential property market has experienced modest growth over the past five years, with significant regional variations.
The national average annual growth rate has been subdued at only 0.9-1.1% in the most recent year. This reflects broader economic challenges including inflation pressures and currency depreciation affecting purchasing power. The compound annual growth rate (CAGR) from 2018-2025 averages around 1.5-2% nationally.
Surabaya demonstrates the most consistent growth trajectory among major cities. Property prices increased by 59% over eight years, rising from IDR 12.6 million to IDR 20 million per square meter. This translates to a healthy annual appreciation rate despite the current national slowdown.
Bali stands as the clear outperformer in Indonesia's property market. Tourist-centric areas have seen some properties double in value over the past decade. Current annual appreciation rates in prime Bali locations reach 10-15%, significantly exceeding the national average. This growth is driven by continued international interest, tourism recovery, and limited supply in desirable coastal areas.
Jakarta shows mixed performance with flat to low single-digit growth in most areas, though prime commercial and residential districts maintain slightly better momentum.
What property price growth is expected for the next 12 months and five years?
The Indonesian property market forecast shows cautious optimism with accelerating growth expected over both short and medium-term horizons.
For the next 12 months, national property prices are projected to rise 2-3%, representing a modest improvement from current growth rates. This increase is supported by declining interest rates and continued urbanization trends. Bali is expected to maintain its exceptional performance with potential growth of 10-15% in prime areas, driven by ongoing international demand and limited beachfront inventory.
The five-year outlook appears more promising with projected national CAGR of 5-8%. This acceleration is underpinned by several key factors: Indonesia's continuing urbanization with 1-2 million new urban residents expected annually, major infrastructure investments including the development of Nusantara (the new capital), and the expanding middle class with increased purchasing power.
Regional variations will remain significant throughout the forecast period. Jakarta and Surabaya are expected to align more closely with national averages, while Bali and other tourist-dependent markets may continue outperforming. The government's ambitious infrastructure programs, including improved connectivity between major cities, should support property values nationwide.
Economic stability and continued foreign investment interest are crucial factors that could drive performance toward the higher end of these projections.
What are the current rental yields in major Indonesian cities compared to Southeast Asia?
Indonesia offers some of the most attractive rental yields in Southeast Asia, particularly for investors targeting specific property types and locations.
| City | Average Rental Yield | Best Performing Property Types |
|---|---|---|
| Jakarta | 6.15-11.17% | Studios and 1-bedroom units (up to 13%) |
| Bali | 6-10% | Prime villas (10-15% for short-term rentals) |
| Surabaya | 7-10% | Smaller properties perform best |
| National Average | 7.15% | Mixed property types |
| Regional Comparison | Above average | Outperforms Bangkok, Ho Chi Minh City, Kuala Lumpur |
Jakarta's rental market shows impressive performance with gross yields ranging from 6.15% to over 11%. Studios and one-bedroom apartments perform exceptionally well, often achieving yields up to 13%. This reflects strong demand from young professionals and the growing expatriate community working in Indonesia's business capital.
Bali's rental market benefits from both long-term residential demand and lucrative short-term vacation rental opportunities. Prime villa locations gross 6-10% on traditional rentals, while properties optimized for short-term vacation rentals can achieve 10-15% or higher. The island's year-round tourism appeal and digital nomad influx support these strong yields.
These Indonesian yields compare favorably to regional benchmarks. Jakarta and Bali generally outperform comparable markets in Bangkok, Ho Chi Minh City, and Kuala Lumpur, making Indonesia an attractive destination for yield-focused real estate investors.
How many new housing and commercial projects are expected through 2030?
Indonesia's construction sector is experiencing robust growth with significant residential and commercial development projected through 2030.
The commercial construction market alone is forecast to grow from USD 55.18 billion in 2025 to USD 81.80 billion by 2030, representing an impressive compound annual growth rate of approximately 8.2%. Residential and commercial construction combined accounts for roughly 40% of total construction output, indicating substantial activity in the property sector.
The development pipeline is driven by several major initiatives. The construction of Nusantara, Indonesia's new capital city, represents one of the world's largest urban development projects and will require massive residential and commercial construction over the coming decade. Additionally, nationwide infrastructure programs are spurring complementary residential development in urban centers.
Annual housing completions are expected to reach tens of thousands of new units yearly in major urban centers. This construction boom is supported by accelerating urbanization trends, with 1-2 million new city residents projected annually through 2035. The government's commitment to improving housing affordability and infrastructure connectivity further supports this development trajectory.
Foreign direct investment in Indonesian real estate is expected to accelerate, particularly with the Nusantara development and policy liberalization, providing additional capital for large-scale residential and commercial projects.
What are current mortgage rates and the forecast?
Indonesia's mortgage market is experiencing a favorable environment with declining interest rates and positive forecasts for borrowers.
As of September 2025, the average mortgage interest rate stands at 6.87%. This represents a significant improvement from recent years, with rates declining approximately 1.4% since 2021. The reduction reflects Bank Indonesia's accommodative monetary policy aimed at supporting economic growth and the property sector.
Bank Indonesia's benchmark rate was cut to 5.0% in August 2025, marking the fifth reduction since September 2024. This aggressive easing cycle demonstrates the central bank's commitment to maintaining favorable borrowing conditions. The policy environment supports both residential and commercial property investment through reduced financing costs.
The mortgage rate forecast appears positive for prospective property buyers and investors. Rates are expected to stabilize or continue declining toward a range of 4.5-5.5% through 2026 as monetary easing continues. This trajectory would bring Indonesian mortgage rates to their most attractive levels in several years, potentially stimulating additional property demand.
The favorable rate environment, combined with improving economic conditions and continued urbanization, creates an attractive financing landscape for property investment and home ownership in Indonesia.
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What percentage of property purchases use cash versus mortgages?
Indonesia's property financing landscape shows a strong preference for mortgage financing, particularly in urban areas.
Nationally, 70% of residential home purchases utilize mortgages (known locally as KPR - Kredit Pemilikan Rumah) as of Q1 2025. This high mortgage utilization rate reflects both the availability of financing and the growing financial sophistication of Indonesian property buyers. The remaining 30% of transactions are completed with cash, often favored in rural areas and for high-value urban properties.
Urban versus rural financing patterns show significant variation. In urban areas, mortgage usage reaches 41.3% of all residential transactions, while rural areas show only 3.4% mortgage utilization. This disparity reflects differences in banking infrastructure, income levels, and property values between urban and rural markets.
Cash purchases remain popular for several specific scenarios. High-net-worth individuals often prefer cash transactions for luxury properties, particularly in premium Bali locations. Foreign buyers may also lean toward cash purchases due to financing restrictions or complexity. Additionally, rural and lower-value property transactions frequently involve cash due to limited banking access.
The trend toward increased mortgage usage is expected to continue as Indonesia's banking sector expands and financial inclusion improves. Declining interest rates further support this shift toward financed property purchases.
How has foreign direct investment in Indonesian real estate changed?
Foreign direct investment in Indonesian real estate has experienced steady growth over the past five years, with positive momentum expected to continue.
FDI in the Indonesian real estate sector has grown consistently since 2020, benefiting from regulatory reforms aimed at attracting international capital and the gradual recovery of Indonesia's tourism sector. While real estate FDI represents a smaller share compared to manufacturing and other industrial sectors, it forms a growing component of Indonesia's total foreign investment inflows.
The regulatory environment has become increasingly favorable for foreign real estate investment. Reforms have simplified processes for establishing PT PMA entities (foreign investment companies), which are required for foreign property ownership. Minimum price thresholds for foreign buyers have been relaxed in some areas, and streamlined approval processes have reduced bureaucratic barriers.
Several factors are driving increased foreign interest in Indonesian real estate. The development of Nusantara, Indonesia's new capital city, represents a massive opportunity for international investors and developers. Additionally, Indonesia's growing middle class, continued urbanization, and relatively attractive property yields compared to regional markets appeal to foreign capital.
The outlook for foreign real estate investment appears positive, with accelerated growth expected as the Nusantara development progresses and further policy liberalization occurs. However, the government continues monitoring speculative investment to ensure foreign capital contributes positively to domestic housing affordability.
What is Indonesia's urbanization rate and projection?
Indonesia is experiencing rapid urbanization that fundamentally supports long-term property demand across major cities.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Indonesia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
As of 2025, Indonesia's urbanization rate approaches 58-60%, representing a significant shift from the country's historically rural population base. This urbanization trend shows no signs of slowing, with projections indicating 1-2 million new urban residents annually through 2035. This massive population shift creates sustained demand for housing, infrastructure, and commercial development in urban centers.
The geographic distribution of urbanization heavily favors Java and Bali, where major economic centers are located. Jakarta, as the primary business hub, continues attracting domestic migrants seeking employment opportunities. Bali benefits from both internal migration and international interest from expatriates and digital nomads. Surabaya and other regional centers also experience steady urban population growth.
Infrastructure investment is both driving and responding to urbanization trends. The government's ambitious infrastructure programs, including improved connectivity between cities and the development of Nusantara, are expected to accelerate urban population growth in specific regions. These investments create multiplier effects, generating employment and attracting additional residents to urban areas.
Long-term projections suggest urbanization will continue well beyond 2035, though the rate of change may moderate as Indonesia approaches urbanization levels similar to other developed Southeast Asian countries. This sustained urban population growth provides fundamental support for residential and commercial property demand.
How does Indonesia's property affordability compare to neighboring countries?
Indonesia's property affordability presents a mixed picture when compared to regional neighbors, with significant variations between cities and market segments.
Jakarta and Surabaya remain more affordable than comparable cities in the region. When measuring price-to-income ratios and considering rental yields, these Indonesian cities offer better value propositions than Bangkok, Hanoi, and Kuala Lumpur. Jakarta's average pricing of USD 2,190 per square meter compares favorably to Bangkok's higher levels, while offering superior rental yields of 6-11%.
Surabaya stands out as particularly affordable at USD 1,200 per square meter, significantly lower than any major regional city while still offering decent rental yields of 7-10%. This affordability makes Surabaya attractive for both Indonesian domestic buyers and foreign investors seeking entry-level opportunities.
Bali represents a notable exception to Indonesia's affordability advantage. Prime Bali locations now command USD 1,000-3,300+ per square meter, making them very expensive relative to Indonesian national incomes. Bali's pricing has reached levels comparable to premium markets in Thailand and Malaysia, reflecting its unique appeal to international buyers and tourism-related demand.
The affordability trend varies by location and market segment. Affordability is generally improving outside Bali, plateauing in Jakarta's established areas, but declining sharply in premium coastal and expatriate-focused locations. This creates opportunities for savvy investors who can identify emerging areas before significant price appreciation occurs.
It's something we develop in our Indonesia property pack.
What are the current government incentives and foreign ownership restrictions?
Indonesia's regulatory environment for foreign property ownership involves specific restrictions balanced with incentives designed to attract international investment.
Foreign ownership restrictions maintain clear minimum investment thresholds and structural requirements. Foreign buyers must meet minimum price limits of IDR 1 billion (approximately USD 65,000) for apartments and IDR 5-10 billion (USD 325,000-650,000) for landed houses. Ownership is available through Hak Pakai (right to use) or HGB (building rights) titles, with full freehold ownership (Hak Milik) remaining restricted to Indonesian citizens.
Recent regulatory changes have generally favored foreign investment. Minimum price requirements for non-residents have been relaxed in certain areas, and administrative processes have been streamlined. The establishment of PT PMA entities, required for foreign property ownership, has become more efficient with reduced bureaucratic barriers and clearer guidelines.
Previous government incentives including secondary VAT benefits and simplified landed housing rules have been gradually removed as the market has matured. However, the overall regulatory direction continues supporting foreign investment through process improvements rather than direct financial incentives.
The government maintains a balancing act between attracting foreign capital and protecting domestic affordability. Ongoing monitoring addresses concerns about speculative investment potentially pricing out local buyers, particularly in markets like Bali where foreign demand significantly influences pricing.
Future policy focus will likely continue this balanced approach, welcoming foreign investment while ensuring it contributes positively to Indonesia's housing market and economic development rather than creating speculative bubbles.
What are the major risks to Indonesia's property market in the next decade?
Indonesia's property market faces several significant risks over the next decade that investors and residents should carefully consider.
1. **Oversupply in middle-range segments** poses the most immediate risk, particularly in Jakarta and Surabaya. Rapid construction of mid-market apartments and commercial properties could exceed demand, leading to price stagnation or declines in specific market segments.2. **Interest rate volatility** represents a key financial risk. While current trends show declining rates, global inflation pressures could force Bank Indonesia to reverse course, potentially impacting property affordability and investment returns.3. **Currency volatility** affecting the Indonesian Rupiah could impact foreign investment flows and purchasing power, particularly relevant for international buyers and those earning foreign currencies.4. **Affordability pressure** for lower and middle-income segments could limit domestic demand growth, particularly as property prices outpace income growth in some areas.5. **Demographic shifts** including slowing population growth and potential urbanization plateau after 2030 could reduce the fundamental demand drivers supporting the market.6. **Policy tightening** risk exists if speculative bubbles develop or social unrest emerges due to housing affordability concerns, potentially leading to restrictive foreign ownership rules or cooling measures.7. **Infrastructure project delays** represent a tail risk, as Indonesia's ambitious government infrastructure programs, including Nusantara development, could face funding challenges or implementation delays that impact regional property markets.Conclusion
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.
Indonesia's property market fundamentals remain robust with moderate growth expectations and attractive rental yields, particularly in Jakarta and Surabaya compared to regional alternatives.
Success in the Indonesian property market will depend on careful location selection, understanding local regulatory requirements, and monitoring trends in urbanization, interest rates, and foreign investment policies.
Sources
- Global Property Guide - Indonesia Price History
- Bali Villa Realty - Cost of Property in Bali
- BambooRoutes - Surabaya Property Market
- Global Property Guide - Indonesia Rental Yields
- BambooRoutes - Average House Prices Jakarta
- BambooRoutes - Average House Prices Indonesia
- Trading Economics - Indonesia House Price Index
- BambooRoutes - Indonesia Price Forecasts
- BambooRoutes - Indonesia Property Market Outlook
- ASEAN Briefing - Indonesia Construction Market Forecast