Indonesia has been a hotspot for many real estate investors seeking to diversify their residential property portfolio by investing overseas. It has the largest economy in Southeast Asia with impressive economic growth ever since it overcame the Asian Financial Crisis in the late 1990s. Its GDP per capita has been increasing at a steady rate, from just $823 in 2000 to $3,392 in the year of 2018. Currently, it is one of the world’s most populated countries and has succeeded in reducing the poverty rate by greater than half since 1998. With strong investment, steady inflation and a healthy job market, the country’s economic outlook remains positive and the growth is predicted to continue in the coming years.
- Weak Performance in The Residential Property Market
The real estate market has been relatively weak in recent years, which is a testament to the country currently being one of the most affordable real estate markets in Asia. After undergoing a sharp growth in 2012, the residential market has cooled down in the past few years. According to the Federal Reserve Bank of St. Louis, the average price increase reduced from 14% to just 3% between 2013 and 2018. In the second quarter of 2019, it was approximately 2.5%, which was comparatively lower. However, there was a substantial increase in the presales market in the first half of 2018, and based on a report by DBS Bank, demand for residential properties increased in 2018, alongside an improvement in the rental yields.
- Strong Demand Predicted in The Coming Years
Despite the prevailing weak performance in the market, several factors will positively affect the market in 2020 and the following years. Experts have predicted that the economy will grow by 5.3% with one of the main factors being a 8.5% increase in the government’s budget for 2020. In addition, multiple international investors have invested in the financial segment and other sectors, which has led to more investment and a higher consumption by the middle-class consumers. A report by the World Bank indicates that 50 million people fall under the middle-class category and have a substantial impact on the economy. Hence, younger people, with rising disposable incomes, will slowly flip the housing market around as demand for housing rises. And also, various mega infrastructure projects have been planned, which will further result in an increase in demand for residential properties far away from the central areas. The combination of these growth-inducing factors, coupled with stable Indonesian Rupiah, will improve the real estate market in Indonesia.
- Various Real Estate Ownership Options for Foreigners
Currently, there are a few options available for foreigners to invest in real estate. Many foreigners purchase residential properties through the names of Indonesian citizens. These citizens act on the foreigners’ behalf to obtain “Right to Own” certificates for their properties. However, this is a risky practice as a citizen can overtake the property that he has acquired on behalf and there is not much a foreigner buyer can do in this case. In fact, many have lost their money via this scheme. On the other hand, there is a safer way for foreigners to own properties in Indonesia. A foreign investor can set up a foreign limited liability company in the country and be given the right to either build or use property. However, there are many requirements that a foreign investor needs to meet in relation to this right. Speaking of which, the Indonesian government has recently streamlined the country’s licensing process for foreign investment, which will further lead to an increase in demand for housing estates.
- Increasing Number of Facility Management Options for Foreign Investors
The growing number of facility management companies in Dubai with a gradual, strong growth in the facility management market has been due to the country’s rapid development in the real estate sector and massive spending on upgrading the infrastructure of the metropolis. Hence, Indonesia will experience the same growth, and the facility management market is already at the growing stage, the rate of which is expected to increase. When it comes to facility management, foreigners will have very little problem managing their properties despite many miles away.
Given the predicted strong demand for housing estates in the country in the coming years and the current, cheap selling prices of residential properties, now may be the right time to consider getting a housing estate in the country. Being able to outsource many types of facility management processes, foreigner investors will not have to worry about managing their real estate in the future.