Indonesia Real Estate Report Q3 2011
Includes 3 FREE quarterly updates
Indonesia is one of the few countries to have been little affected by the rest of the world’s economic woes – slowing slightly in 2009 but regaining its momentum in 2010. The country has a growing economy, a large population and relative political stability. The risk perception of investing in Indonesia has improved.
A re-rating of property has resulted in a sharp rise in commercial rentals across all three sub-sectors and in each of the three centres – Jakarta, Bandung and Bali – for which we gather data. Much of the demand for investment property has come from abroad, despite it being somewhat difficult and complicated to buy real estate as a foreigner. Changes are afoot to improve the opportunity for foreign investment but are, as yet, a way away from making it easy.
New legislation on foreign land acquisition is due to be settled by the government this quarter and, if the legislation is passed, it could generate an extra US$3-6bn in foreign direct investment. However, the country has also restricted investment through high interest rates. The rate has dropped from its peak in 2010 but is still much higher than many countries.
In 2010, much of the commercial real estate sector continued to see rental rates rise. When we spoke to our in-country sources towards the end of the year, it became apparent that rental costs in the cities had diverged from one another. In Bandung, office and retail maximum rents continued to climb as tourism grew too.
Some of the key opportunities currently in the real estate market are: The country’s residential marketplace is punctuated by plenty of development of luxury property, but a housing deficit of around 8mn affordable units. The Asian Development Bank (ADB) approved a US$300mn scheme in December 2010 to help develop Indonesia's mortgage market and reduce lenders’ current favour of high income earners. The ADB hopes that its Housing Finance Programme will open access to fixed-rate mortgage financing in the local currency, especially for first-time buyers in the mid-income bracket.
We anticipate that rents will continue to rise, some at approximately the same speed and some stabilising.
There is a huge opportunity for the development of affordable housing. Some key risks to the current real estate market are:
There is extensive over-supply of luxury residential properties and the market for them stagnated in 2010.
Political instability will threaten the country’s lower risk image if any trouble occurs.
Indonesia is one of the few countries to have been little affected by the rest of the world’s economic woes – slowing slightly in 2009 but regaining its momentum in 2010. The country has a growing economy, a large population and relative political stability. The risk perception of investing in Indonesia has improved.
A re-rating of property has resulted in a sharp rise in commercial rentals across all three sub-sectors and in each of the three centres – Jakarta, Bandung and Bali – for which we gather data. Much of the demand for investment property has come from abroad, despite it being somewhat difficult and complicated to buy real estate as a foreigner. Changes are afoot to improve the opportunity for foreign investment but are, as yet, a way away from making it easy.
New legislation on foreign land acquisition is due to be settled by the government this quarter and, if the legislation is passed, it could generate an extra US$3-6bn in foreign direct investment. However, the country has also restricted investment through high interest rates. The rate has dropped from its peak in 2010 but is still much higher than many countries.
In 2010, much of the commercial real estate sector continued to see rental rates rise. When we spoke to our in-country sources towards the end of the year, it became apparent that rental costs in the cities had diverged from one another. In Bandung, office and retail maximum rents continued to climb as tourism grew too.
Some of the key opportunities currently in the real estate market are: The country’s residential marketplace is punctuated by plenty of development of luxury property, but a housing deficit of around 8mn affordable units. The Asian Development Bank (ADB) approved a US$300mn scheme in December 2010 to help develop Indonesia's mortgage market and reduce lenders’ current favour of high income earners. The ADB hopes that its Housing Finance Programme will open access to fixed-rate mortgage financing in the local currency, especially for first-time buyers in the mid-income bracket.
We anticipate that rents will continue to rise, some at approximately the same speed and some stabilising.
There is a huge opportunity for the development of affordable housing. Some key risks to the current real estate market are:
There is extensive over-supply of luxury residential properties and the market for them stagnated in 2010.
Political instability will threaten the country’s lower risk image if any trouble occurs.
Contents
Executive SummarySWOT Analysis
Indonesia Real Estate/Construction SWOT
Indonesia Economic SWOT
Indonesia Business Environment SWOT
Real Estate Market Overview
Table: Indonesia’s Real Estate Market – Historic Rents, 2009 And 2010 (m2/month, US$)
Table: Indonesia’s Real Estate Market – Net Yields, 2010 And 2011 (%)
Table: Indonesia’s Real Estate Market – Terms Of Rental Contract/Lease, Mid-2010
Table: Indonesia’s Real Estate Market – Available And Vacant Space, Mid-2010 (m2, unless stated)
Real Estate Market Analysis
Industry Forecast Scenario
Real Estate Outlook
Table: Indonesia’s Real Estate Market – Rentals, 2010-2012 (m²/month, US$)
Table: Indonesia’s Real Estate Market – Forecast Net Yield, 2008-2015 (%)
Construction And Infrastructure Outlook
Table: Indonesia Construction And Infrastructure Industry Data, 2007-2015
Table: Indonesia Construction And Infrastructure Industry Data, 2012-2020
Macroeconomic Outlook
Table: Indonesia – Economic Activity, 2008-2015
Business Environment Ratings
Real Estate/Construction Business Environment Rating
Table: Asia Real Estate/Construction Business Environment Ratings
Indonesia’s RECBER
Indonesia’s Business Environment
Table: BMI Business And Operation Risk Ratings
Table: BMI Legal Framework Rating
Table: Labour Force Quality
Table: Asia, Annual FDI Inflows
Table: Trade And Investment Ratings
Table: Top Export Destinations, 2002-2009
Competitive Landscape
Company Profiles
Adhi Karya
Holcim Indonesia
Jakarta Propertindo
Lippo Karawaci
Pakuwon Jati Tbk
Semen Gresik
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
Real Estate/Construction Business Environment Rating
Table: Weighting Of Indicators
Project Finance Ratings Indicators
Table: Design And Construction Phase
Table: Commissioning And Operating Phase – Commercial Construction
Table: Commissioning And Operating Phase – Energy And Utilities
Table: Commissioning And Operating Phase – Transport
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