Why Indonesia is the next property hotspot

Proposed
changes to property laws in the Indonesian capital of Jakarta could see the
price of homes increase significantly. As the country enjoys strong economic
growth, the government are considering opening up the property market to allow
foreigners to buy property in Indonesia.

With rental
demand from expats also strong, property in Jakarta could prove to be an
excellent investment, as we see next.

Strong overseas demand set to
push up prices of property in Indonesia

The Daily Telegraph reports that ‘strong
demand for rental property from expats has seen costs shoot up almost 15 per
cent this year as expats head to Indonesia’. It is estimated that around 45,000
foreign workers live in expensive city-centre apartments near Jakarta’s
business districts.

This strong
demand from foreigners could soon turn into property sales once the government
allows foreigners to purchase property in their own name. The Indonesian
government has said that it wants to open the property market to foreigners
while still restricting purchases of land. This is in the form of new
regulations that give foreigners the right to apply for the purchase of a
Building Ownership Certificate (SKBG) that would be separate from land rights.

Neil Jensen,
Asian head of operations for property experts Fraser & Co, said: “Currently
the law is very similar to that in Thailand whereby your only opportunity to
own property or land is if it is bought in the name of a local national –
typically a spouse or close friend.

“The new
ruling will apply to specific buildings and at this stage it is only likely to
be available in Jakarta, Bali and Batam with a further caveat that foreign
ownership of any qualifying building will be capped at 40 per cent.”

I would expect to see
these new regulations result in a sharp increase in the value of property in
the major Indonesian cities. However, obtaining a mortgage in the country
remains difficult so the banks would also have to change their lending criteria
for foreign purchases to really take off.

Author

Nick
Marr