Indonesia home prices to trend up over next two years, Moody’s says

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A subsidised housing development in Bogor, West Java, Indonesia on January 6, 2020. ANTARA

Indonesian home prices will see strong growth in 2022 and 2023, financial intelligence firm Moody’s Analytics has predicted, following a long period of muted growth exacerbated by the Covid-19 pandemic.

Moody’s expects the country’s home price index to grow five per cent next year and six per cent in 2023. This year, the index is expected to post only about 1.5 per cent growth.

This year, the country’s home price index will fall below the 4.42 per cent average growth among selected Asia-Pacific countries, but the index is expected beat the forecast regional averages of 3.45 per cent and 3.64 per cent growth for 2022 and 2023, respectively.

The housing price index has seen sluggish growth since at least 2015, growing by less than five per cent year-on-year on a quarterly basis, Bank Indonesia (BI) data showed. On an annual basis, growth above six per cent was last seen in 2014.

Moody’s Analytics economist Sonia Zhu attributed the expected rise in house prices to pent-up demand and favourable real estate investment policies, including low interest rates, tax incentives, and relaxed restrictions on foreign ownerships, all of which would raise demand in 2022 and 2023.

“However, the projected high growth is also due to the low-base effect from 2021. The Delta surge in the third quarter of 2021, lockdowns, and the weak labour market are weighing on the house price index for 2021,” she wrote in an email to the Jakarta Post.

The central bank is expecting housing prices to creep up still more slowly in the July-September period, largely as a result of Covid-19 restrictions imposed in response to a July case surge.