Indonesia’s property not heading towards a bubble

The notion was first raised by The World Bank in March 2013, which released a report for the first quarter of the year titled “Pressures Mounting”. But while banks, developers and consultants play down the rapidly increasing prices and surge of real estate lending in local banks , JLL’s Head of Research, Indonesia, argues that the market is robust enough to avoid a burst.

Writing on the group’s blog, Anton Sitorus says: “I am sure that most people would agree that the current condition of the property market is a lot different to what it was before the Asian Financial crisis in early 1998. While there has been a significant price appreciation in some property types (particularly landed properties and industrial land) in some locations, the overall macro conditions are more robust and relatively sheltered from any potential downturn.”

Indeed, according to the Central Bank, the ratio of credit to bank loans is below 14 per cent - compared to 20 per cent in the 1990, while the government is likely to tighten its loan-to-value ratio for first time buyers from the existing maximum of 70 per cent.

Sitorus forecasts that the market will “continue its positive trend” on the back of Indonesia’s strong economic growth, with demand and increased buyer purchasing power helping to move prices up.

He concludes: “The market is not heading for a bubble but likely to remain on a sustainable growth path.”