Property Prices in Indonesia

[Anglian]

Then where will you live?
I hear there's many cheap properties in Syria and Northern Iraq....but maybe the yelling of Allah Akbar and the nightly fireworks display will deter living there.

Well Balikpapan was nice, probably the most expensive city in Indonesia, but nice beaches, good fishing and excellent sea food restaurants, and getting around is very easy, plus you have the friendly Dyaks to keep any potential nut case in check

 

[Smallworld]

Well people don't get mortgages interest free so pretty hard to afford most homes. Plus they have other expenses. I believe the middle class about 2 years ago was roughly 4 to 8 or 9 million per month. The upper middle class earn more. Of course most people can not afford a place in London either but London allows for foreign ownership and Indonesia does not, so that is one huge difference. In Sydney, London, Vancouver etc. it is foreign investment that drove up a lot of the prices. Indonesia does not have this money pouring in. I am still not sure who affords a lot of the properties, certainly not the middle class. And accountants/IT/or most Drs. don't make that much either.

But the 2 for 1 deal sounds pretty good.

I agree there are no mortgages without interest rates. My calculations were only show it is possible (can afford 1.2M for mid class 10jt/month one person or 5jt/ 2 people) without putting too many variables into equation to avoid necessary headache like, daily expenses, interest rates, tax ect. If you want to include them you had to add extra time needed to repay it all in mortgage 15-20 years.. more perhaps.

To answer simply your question on who can afford properties in Indonesia are ... people with money whoever they are in their profession. (seems you are not satisfied with my previous answer)

"Indonesia does not have this money pouring in."

Tax amnesty was just done so: "The funds must be kept in Indonesia for three years and can be invested in several ways, including direct purchases of property." Which bank in Indonesia will pay you better rates than what you can gain on property? Even banks got partnership with developers and advised its tax-amnesty's customers to buy properties from the tax amnesty money.

I know personally few people with 4-6 jt/month who have 2-3-5 properties (cheap houses but still ... they have, and they develop their portfolio of properties). I know some people who on 5jt. per month took mortgage on a house 500 jt. then tried to sell it for 1.5 M year later on. In this case he defaulted ... but it shows you the extent of "investment risk" he took and they are many people who try their luck in investment and quick profit in properties.

Unfortunately I don't know that much about property market in Canada or Australia and what has driven the property prices there.

 

[Smallworld]

"...London either but London allows for foreign ownership and Indonesia does not, so that is one huge difference."

I don't think this is the reason why property prices went up in London.... in other EU countries where foreigners can buy properties did not have property prices going up ... why?

 

[centurion]

I think prices in Jakarta started to implode already. With new governor soon and presidential elections soon, tighter taxpayer control and higher taxes, the prices will be stepping downward. Also, average salary cannot sustain these prices.

Everybody tries to sell real estate with crazy prices but not much real transaction going on. Next 2-3 years will be good for cheap deals.
Some pockets, like Bandung (nice city btw contrary to Jakarta) or other locations in the islands, are still going to hold prices.

 

[Daniel50]

I know personally few people with 4-6 jt/month who have 2-3-5 properties (cheap houses but still ... they have, and they develop their portfolio of properties). I know some people who on 5jt. per month took mortgage on a house 500 jt. then tried to sell it for 1.5 M year later on. In this case he defaulted ... but it shows you the extent of "investment risk" he took and they are many people who try their luck in investment and quick profit in properties.

Unless someone with 5 million per month buys and flips, I don't know how that is possible to have 2-5 properties, as rents here do not sustain paying off a mortgage. The money is from within Indonesia and property prices are going up/or have been but I just don't see the incomes of most people keeping up including buying and renting to pay off a 2nd or 5th mortgage on 5 or 10 million per month. There is definitely a lot of money floating but most salaries are relatively small.

I guess if a person looks at the extent of corruption right through the system, then this can account for a lot of money going into the housing market and historically Indonesians have put their money in property. I am not sure where the ceiling could be for property prices, but most rents do not work to pay off mortgages, and of course their are regional etc variances. I guess a lot will have to do what direction the country takes in the future. I know house prices in parts of Spain eg. were way down a few years ago and of course in the US after 2008.

Of course there are many Indonesians who are also able to pull themselves up, through hard work and sacrifice.

 

[satomoto]

Unless someone with 5 million per month buys and flips, I don't know how that is possible to have 2-5 properties, as rents here do not sustain paying off a mortgage. The money is from within Indonesia and property prices are going up/or have been but I just don't see the incomes of most people keeping up including buying and renting to pay off a 2nd or 5th mortgage on 5 or 10 million per month. There is definitely a lot of money floating but most salaries are relatively small.

I guess if a person looks at the extent of corruption right through the system, then this can account for a lot of money going into the housing market and historically Indonesians have put their money in property. I am not sure where the ceiling could be for property prices, but most rents do not work to pay off mortgages, and of course their are regional etc variances. I guess a lot will have to do what direction the country takes in the future. I know house prices in parts of Spain eg. were way down a few years ago and of course in the US after 2008.

Of course there are many Indonesians who are also able to pull themselves up, through hard work and sacrifice.

How much percentage of mortgage cost can the rent cover? Say for a 20 - 30 mortgage.

 

[Daniel50]

How much percentage of mortgage cost can the rent cover? Say for a 20 - 30 mortgage.

Yes I am not sure but I know in some areas the houses are selling for 2 or 3 billion and a person can find rentals for quite a bit less then a mortgage.

But looking at some 25 year mortgages for say 840 million at 7.75% the payment would be 6.3 million per month. This would be doable for some couples for sure. And there are still less expensive places that should be doable for some middle class, as Smallworld indicated. If people can come up with a down payment it looks doable for some middle class.

I noticed there were also a lot of more expensive properties and the rents just did not match. But for those who invested in property they have made a nice profit and for others, like BA hopefully their property continues to rise.

 

[Bad_azz]

We paid cash for ours, so I have no idea about taking loans & paying mortgages. It was definitely a fixer upper when we got it.
One of the reasons we bought was because of the place being "famous" locally for its water supply- apparently our well is rather unique in the village in that it has never run dry- nicely fed by volcanic spring water. Another was the views. I have had several properties over the years & always done well when selling on. I guess I have a good instinct for the right location.
If I was investing for rental, I would get as kosan. I would not dream about renting out privately UNLESS I was in Bali/ some other beachy foreign tourist hot spot. & Even then holiday rentals would bring in more cash.

 

[satomoto]

Yes I am not sure but I know in some areas the houses are selling for 2 or 3 billion and a person can find rentals for quite a bit less then a mortgage.

But looking at some 25 year mortgages for say 840 million at 7.75% the payment would be 6.3 million per month. This would be doable for some couples for sure. And there are still less expensive places that should be doable for some middle class, as Smallworld indicated. If people can come up with a down payment it looks doable for some middle class.

I noticed there were also a lot of more expensive properties and the rents just did not match. But for those who invested in property they have made a nice profit and for others, like BA hopefully their property continues to rise.

Hi, for the sake of discussion let's use the famous Thamrin Residence nearby Grand Indonesia as reference.

Sales price for a 2 bd apartment is ~ 2billion IDR and the monthly rent is ~10million IDR. If we were to pay by cash our investment is recoup in 17 years. That is the worse case scenario as we assume there is no rent increase. Can we assume that after 17 years the apartment is at least twice the price? Yes and most likely more.

In 17 years your investment of 2billion brings in 6billion. 4billion from the sales price and another 2billion through rent. There is compound interest which one gets from the rent annually and also rent increment going forward., The 2x house price in 17 years might be conservative? Can we just wildly guess that we can make 8billion from it.

So all in all 4x return for an upfront investment of 2billion IDR. Is that worth it?

Side notes:
1. the effort to collect rent and house maintainence is not factored
2. very likely rent and house sales price increase faster than stated. If any indication the rent could double or triple.
3. Based on rule of 72 your annual return is ~9% per annum?

 

[satomoto]

We paid cash for ours, so I have no idea about taking loans & paying mortgages. It was definitely a fixer upper when we got it.
One of the reasons we bought was because of the place being "famous" locally for its water supply- apparently our well is rather unique in the village in that it has never run dry- nicely fed by volcanic spring water. Another was the views. I have had several properties over the years & always done well when selling on. I guess I have a good instinct for the right location.
If I was investing for rental, I would get as kosan. I would not dream about renting out privately UNLESS I was in Bali/ some other beachy foreign tourist hot spot. & Even then holiday rentals would bring in more cash.

Hi Bad_azz, any chance you know that properties in Bali can be sold to foreigners under "hak milk" title but not just the usage rights aka "hak guna"?

 

[Bad_azz]

Foreigners can not buy land in Indonesia under Hak Milik. They can buy what is on the land, but cannot own the land itself.
Unless there is some kind of business ownership... I am not sure of all the gubbins around this as I haven't had to deal with a business /property ownership.
I am married to an Indonesian guy so we had no difficulties just buying our property- obviously the deeds are in his name. x

 

[Davita]

Foreigners can not buy land in Indonesia under Hak Milik. They can buy what is on the land, but cannot own the land itself.
Unless there is some kind of business ownership... I am not sure of all the gubbins around this as I haven't had to deal with a business /property ownership.
I am married to an Indonesian guy so we had no difficulties just buying our property- obviously the deeds are in his name. x

and the scissors and elastoplast are in B_A's hands...hehehe...no offence B_A...couldn't help myself.

 

[Bad_azz]

and the scissors and elastoplast are in B_A's hands...hehehe...no offence B_A...couldn't help myself.

What elastoplast any bits chopped off would be fed to the dogs

No offence taken , at all. Hubby just crossed his legs & then decided that wasn't prudent enough, so has gone out to the garden... perhaps to hide the shears

 

[Davita]

What elastoplast any bits chopped off would be fed to the dogs

No offence taken , at all. Hubby just crossed his legs & then decided that wasn't prudent enough, so has gone out to the garden... perhaps to hide the shears

hahaha...the Elastoplast is clearly for any damage you may have to endure yourself...like a paper cut from chopping the title deeds before making into confetti...

 

[Daniel50]

Hi, for the sake of discussion let's use the famous Thamrin Residence nearby Grand Indonesia as reference.

Sales price for a 2 bd apartment is ~ 2billion IDR and the monthly rent is ~10million IDR. If we were to pay by cash our investment is recoup in 17 years. That is the worse case scenario as we assume there is no rent increase. Can we assume that after 17 years the apartment is at least twice the price? Yes and most likely more.

In 17 years your investment of 2billion brings in 6billion. 4billion from the sales price and another 2billion through rent. There is compound interest which one gets from the rent annually and also rent increment going forward., The 2x house price in 17 years might be conservative? Can we just wildly guess that we can make 8billion from it.

So all in all 4x return for an upfront investment of 2billion IDR. Is that worth it?

Side notes:
1. the effort to collect rent and house maintainence is not factored
2. very likely rent and house sales price increase faster than stated. If any indication the rent could double or triple.
3. Based on rule of 72 your annual return is ~9% per annum?

Well it sounds like you will be making a handsome profit. Perhaps you should invest in 3 or 4 (for discussions sake) and hope your predictions come true, low vacancy, low maintenance fees and continued rising prices (which they very well may). I have noticed that many apartments are more expensive then renting/buying houses in many areas.

 

[scouser59]

And what if the price drops , like in south bali ,- 40% ++

 

[Jamu]

And what if the price drops , like in south bali ,- 40% ++

What is your evidence for this statement?

 

[Daniel50]

Well economies and sectors expand and contract depending on what is driving them. If there are enough fundamentals then all seems to be proceeding well. The thought on Java Island is there is enough population to feed the ever growing demand for real estate and the prices continue to grow. Of course there are variants in different areas but overall prices on most of Java have been on an upward trajectory. There are many things which can change this including overall demand based on price points and peoples salaries. I am not sure if Bali is an over saturated market, water concerns in the South etc. or if there are pockets where the price is down and other areas where things are more stable,

 

[scouser59]

What is your evidence for this statement?

to repeat my previous comment on page 1
South bali is "dropping like a stone" or not selling , I have a few acquaintances who sold villas minus 40% ++ to asking price , ubud is still quite strong , in the village I live in nothings moving 1 guy sold land with a free house !
Unfortunately with the usual poor build quality buying is a scary business .
Also
ndeed south bali is overbuilt with inferior quality houses , and it still continues unabated , typically with 2 week guarantees which is crazy , in my view , jeez I got a 3 year guarantee on my car , hotels normally only have a 3 month guarantee , I believe there are more normal property construction guarantees ie around 10 to 15 years in surabaya from a building company , which I am still researching , but honestly I prefer to rent at the moment because it is far cheaper than the maintenance, the owner had to completely replace the roof on our place and its only 10 years old , unbelievable !

 

[Davita]

Bali asking prices do not reflect their value and nothing is selling because the owners cannot believe their property isn't worth what they thought. There are 4 villas, next to mine, that were built over 2 years ago and still not sold They've remained empty and need constant maintenance. Two of them have had their pool pumps stolen.