1. Bank Indonesia (BI) estimates that Indonesia's economy will grow to be in the range of 4.8% to 5.8%. The resilience of the economy next year will be supported by improvements in a number of components that make up the gross domestic product (GDP). How will this impact Indonesia's property sector in general?
If the economy improves, all sectors are expected to ease, including real estate. However, we should read the awaited growth as a catalyst for property sector as it will take extraordinary effort to achieve a growth of above 4.8% by the end of the year.
Property revival might not immediately take place in 2021, but it is expected that this year will be a preparation year for developers, business players and investors to start accelerating business. The development of vaccines also provides a positive signal for the investment climate and improving economic growth in Indonesia.
2. How will the current restriction of community activities in Java-Bali affect the economic prediction and the Indonesian property sector?
The intention of the restriction is for the greater good. Up until now, it has not significantly affected the predictions regarding economic growth since it is enforced for only two weeks until 25 January 2021. However, the impact on the property sector will be significant for hotels and retail. This is because the content of the regulations is also directly related to those asset classes. As long as the restriction is not prolonged, the predictions of economic improvements and the property sector are still open.
3. BI Governor Perry Warjiyo has mentioned there are several conditions that must be in place so economic recovery can be accelerated. One of the conditions is the opening of 15 second-priority sectors, which include the real estate sector. How will this help the real estate sector to revive?
This would be a good step, because the sectors prioritised to be opened first are sectors that are very close to the basic needs of society, such as food and beverages.
After the first priority sectors have experienced improvement, sectors such as real estate will follow suit, so that they can gradually improve and truly rise and develop. If the Indonesian economy has improved, followed by basic needs fulfilment, other sectors will also follow, as well as property.
Therefore, it is important when real estate starts to move again, although quite slowly, if the preparation starts now, the economic growth target in 2021 will slowly recover, and the property sector will also recover.
4. As Indonesia's economic growth will come from investment, which is also in line with the enactment of the Employment Creation Law (UU Cipta Kerja), how has the investment climate in Indonesia been giving positive signs so far to the revival of the property sector?
It can't conclude yet for now on how and what kind of positive signs have been significantly shown towards the revival of the property sector. The Omnibus Law should be interpreted by the implementing regulations (president and/or minister regulation) to be more certain. However, it is expected that the Omnibus can open up better and bigger opportunities so that foreign investors are interested in investing in Indonesia and it will be a positive signal for the property sector in the future.
Economic and property developments need to be continuously monitored. The year 2021 may not be as bad as last year because we adapted to the situation in 2020, and this year's preparations can be more mature and calculated.
In principle, 2021 may be the initial year in which the indirect resurrection of property will be maximised, but we are heading for the revival itself. The year 2021 is the right year to do all preparations and renew our strategy so that the property market in the next two to three years can be more stable and promising.
For more information on our Research Services, please click here. If you wish to learn more, please contact our experts: