Millennials, who make up nearly a quarter of Indonesia’s population, are becoming an increasingly hot market for property developers and mortgage lenders.
Naufal Adam, 23, is a prime example. The corporate bank analyst has 500 million rupiah ($36,600) to put down as a deposit and plans to take out a five-year mortgage.
“I feel that renting an apartment or a boarding house is only a short-term solution. The value for money diminishes overtime, in comparison to buying a house, which could potentially increase in value,” said Naufal, who now lives with his parents in Bekasi, West Java, 25km from his office in Menteng, Central Jakarta.
His criteria for a house are also typical of young and productive millennials, last week’s Property Outlook 2020 discussion forum organised by online property marketplace rumah123.com heard. Millennials want a house that is affordable, with easy access to the city centre or within Greater Jakarta with close proximity to highways or commuter line stations.
Property developers and lenders are reshaping their business strategies to cater to millennials, born between 1980 and 2000, who constitute 24 per cent of the country’s population of 268 million, Statistics Indonesia data from last year shows. Millennials are also likely to account for 75 per cent of the global workforce by 2025, according to the Deloitte Millennial (Generation Y) Survey.
“The millennial market is growing rapidly because the demographic is very big. Even though some do not have the capital to buy properties with high rates yet, in three to five years [their purchasing power] is going to be great,” AKR Land Development CEO Thomas Go said last week.
AKR Land, a sister company of publicly listed fuel distributor PT AKR Corporindo, has developed the Grand Estate Marina City in Gresik regency, East Java, targeted at millennials with houses starting from 300 million rupiah. Go said millennials accounted for half of his company’s buyers in Gresik.
In Jakarta, where AKR Land developed the AKR Gallery West office tower and residences in Kebon Jeruk, West Jakarta, 25 per cent of AKR Land’s property buyers are millennials.
Other property giants from Ciputra Group to Sinarmas Land are also chasing the millennial market.
At Ciputra’s Citra Maja Raya development in Lebak, Banten, landed houses are available starting from 180 million rupiah, while at its Citra Sentul Raya housing complex in Sentul, West Java, prices start at 660 million rupiah. Sinarmas is also building hundreds of 48sqm houses in BSD City, with prices starting at 800 million rupiah.
“No one wants to buy properties listed above two billion rupiah,” said Real Estate Indonesia’s Arman Nukman during the Property Outlook 2020 panel discussion, adding that prices had to be below 750 million rupiah to attract millennial buyers.
Banks are also actively targeting the demographic by marketing their “millennial mortgage loan” products, which offer lower down payment rates and longer payment tenures, making the monthly instalments less burdensome.
State-owned lender Bank Tabungan Negara (BTN), for one, has channelled 9.3 trillion rupiah in mortgage loans for over 27,500 housing units since October 2018.
Its mortgage product KPR Gaess, a youthful wordplay on “mortgage, guys”, is designed specifically for 21 to 35 year olds and offers a free admin fee, single digit interest rate, a 50 per cent of provision discount and a 30-year loan tenure.
Private lender CIMB Niaga also has its KPR Xtra Bisa. With down payments starting from five per cent, a three-year fixed rate of 5.5 per cent and a tenure of up to 25 years, the lender is looking to grow its customer base through the product.
However, millennials are not only price-sensitive, they are also cautious about debt, according to a 2016 Goldman Sachs Global Investment Research report.
The report said millennials have a preference for experiences over material possession, an analysis that rumah123.com country manager Maria Herawati Manik brought up during the panel discussion.
“The challenge is to convince them. Because their lifestyle is very experiential, this is a challenge to answer to their demands,” said Maria, adding that the generation was more interested in simple yet convertible living spaces – caring more for design than the amount of space.
And with millennials being digital natives, convincing them requires a strong online presence and engagement, said Maria, encouraging businesses to step up their digital marketing game.
She explained that as of last year, online searches for housing had surged 27 per cent on her site, dominated by people aged between 25 and 35.
A rumah123.com consumer survey said there is an unmet appetite for affordable housing. For apartments, 44.3 per cent of the demand is for apartments priced below 300 million rupiah, yet only 30.4 per cent of the supply caters to that demand.
For houses, 16.5 per cent of overall demand is for options below 300 million rupiah but only 8.8 per cent of the supply meets that criterion.
As proximity to public transportation also matters, transit-oriented developments, in which properties are clustered near highways, bus shelters or commuter line stations, will flourish in the years to come, property developers said.
THE JAKARTA POST/ASIA NEWS NETWORK