The Indonesian real estate market continues to generate considerable interest, with 2024 presenting exciting opportunities and potential challenges for investors. While experts anticipate continued growth, several factors are shaping the landscape.
This article delves into the key trends, possible risks, and valuable insights you need to navigate the Indonesian real estate market in 2024.
The Current State of Indonesian Real Estate Market
Analysts estimate that the Indonesian real estate market will reach USD 64.78 billion in 2024 and grow to USD 85.97 billion by 2029, with a Compound Annual Growth Rate (CAGR) of 5.82% from 2024 to 2029.
With improved macroeconomic policies, Indonesia’s robust economy focuses on development. Despite COVID-19, the real estate sector remains strong, contributing IDR 468.22 trillion (USD 29.85 trillion) to GDP in 2021.
Per the Ministry of Public Works and Public Housing (PUPR), the One Million Houses program recorded approximately 312,290 housing units by the end of May 2021.
Market Trends of the Property Industry in Indonesia
Jakarta is emerging as a prime rental market, with serviced apartments experiencing a steady rise in average occupancy rates during Q3 2023.
This increase reflects the normalization of business activities following the easing of restrictions, coupled with heightened demand from expatriates, particularly from Asian countries like Japan, South Korea, and India.
As of Q3 2023, the occupancy rate climbed by approximately 3.5% quarter-over-quarter to reach 60.5%. The average rental rates stood at IDR 445,986/sq m/month (USD 28.85) in the CBD and IDR 410,707/sq m/month (USD 26.57) in South Jakarta, including non-prime areas.
Moreover, when adjusted for inflation, property prices declined by 3.48%. Over the longer term, the property market has shown minimal movement, with prices recording modest increases of 1.47% in 2021, 1.43% in 2020, 1.77% in 2019, 2.95% in 2018, 3.5% in 2017, and 2.38% in 2016. In real terms, prices fell by 1.68% from 2016 to 2021.
Market Segment Analysis in Indonesia
At the end of 2023, Knight Frank Indonesia surveyed stakeholders to gather insights into the property sector’s growth in 2024. Key highlights of the findings are:
| Aspect | Description |
| Economic Growth Outlook | Stable economic growth is expected in 2024 with potential for continued growth, although vigilance is necessary amidst current global economic and geopolitical conditions. |
| Key Risks | Risks in 2024 include the impact of elections, potential interest rate hikes, and inflationary pressures. |
| Property Growth Prediction | Stakeholders anticipate continued growth in the property sector in 2024. |
| Stakeholder Sentiment | 67% of stakeholders are optimistic that the property sector will address economic challenges in 2024. |
| Impact of Government Incentives | At least 73% acknowledge the positive effects of the Government-Borne Value Added Tax Incentive (PPN DTP) on property growth by the end of 2023. |
| Residential Subsector Growth Prediction | Despite concerns about interest rates, the residential subsector (landed houses) is expected to continue growing. |
| Property Subsector Trend Development | An increase in the landed houses, industrial, and Warehouse sectors was predicted. The retail and Hotel sectors are expected to remain stable, while the Strata Apartment, Villa Resorts, and Office sectors are predicted to stagnate. |
| Top 5 Cities for Property Growth | Jakarta, the Nusantara Capital (IKN), Bali, Surabaya, and Tangerang are considered the top 5 cities with prospects for property growth in 2024. |
| Positive Leverage Sectors | Renewable energy, logistics, and e-commerce sectors are believed to leverage property growth positively in 2024. |
Investment Opportunities and Challenges
Understanding the opportunities and challenges of the property sector, in addition to market trends, can help potential investors assess the market further.
Opportunities
- End-users, particularly in landed residential projects, have shown increased demand, and expectations are for lower mortgage interest rates than those seen before the COVID-19 pandemic.
- Standard & Poor’s (S&P) projects that various government and central bank policies will support a 5% to 10% growth in housing sales in 2024, particularly for large developers. Moreover, there is an expectation for medium and small-scale developers to experience increased growth in housing sales.
- Currently, 9.9 million families are experiencing a backlog of homes. Furthermore, estimates suggest that 700,000 to 800,000 new families require housing yearly.
Challenges
- The availability of affordable land is one of the biggest challenges.
- The availability of cheap funding that matches the characteristics of housing financing remains a hurdle to providing affordable housing for the community.
- The limited number of developers with qualifications to partner with the government and credit providers is also challenging.
Unlock Indonesian Real Estate Investment with InCorp Indonesia
Indonesian real estate boasts thriving potential in 2024, enticing investors with promising growth opportunities. InCorp Indonesia is your trusted partner, providing comprehensive support to navigate your entry into this dynamic industry.
Our expertise empowers you to:
- Navigate complexities: Land and property ownership and business license services ensure smooth compliance with local regulations.
- Seize opportunities: Focus on maximizing your investments while we handle the administrative hurdles.
- Benefit from experience: Leverage our expert guidance to navigate the Indonesian property market confidently.
Take advantage of the potential and unlock the doors to successful property investment in Indonesia.