Is it wise to invest in Indonesia’s property market?

indonesia-property-market

Indonesia is a huge country of thousands of islands, sandwiched between Malaysia and Australia. Its economy is by far the biggest in Southeast Asia and is attracting a lot of real estate investments. Many multinational companies have put down roots in Indonesia – as it is a key expansion country for anyone in the energy and mining sectors. Indonesia’s strong economy keeps boosting demand in Bali and prices are forecast to be on a continuous upward trend for the foreseeable future.

The government has recently cut interest rates and has eased restrictions on individual non-Indonesian ownership. They have also implemented laws to make it easier for non-Indonesians to buy residential property in the country. However, these laws only apply to luxury homes that cost over US$723,000.

Indonesia property market, especially in major cities, has seen a solid rise in prices. According to Colliers International, apartment prices in Jakarta range from US$339 per square foot (sq. ft.) in Jakarta central business districts, US$255 per sq. ft. in South Jakarta, and US$164 per sq. ft. in the capital’s non-prime areas.

Rental yields in the capital have risen for the past two years and are around 8.6% to 9.6%. However, the disadvantages of buying a property in Jakarta are high transaction costs and complicated legal process.

Meanwhile, places outside the cities have seen unprecedented price increases in the recent years. Bali’s popularity gained a boost thanks to ecotourism and when it was featured in the 2010 movie “Eat, Pray, Love”. Prices of Indonesia property market in the region have almost doubled in the span of six years. Villas in Bali are priced around US$102 to US$214 per sq. ft. and rental yields are 3.8% to 5.0%.

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