Slow growth the main risk to Indonesian property market: Report

Nuvasa Bay, a township development in Batam with an 18-hole golf course. Plans are being made to turn the area into an integrated luxury residential and mixed-use development.
NOVEMBER 06, 2019 - 9:55 PM

THE biggest risk to Indonesia’s property sector is economic growth that falls below the 5 per cent benchmark, according to a recent report from Maybank Kim Eng.

That’s even as the house held to a “positive” rating on the sector, with analysts’ confidence stemming from lower mortgage rates and a supply of cheaper housing by developers.

“We believe the new supply will continue to be absorbed by the market, despite a lacklustre economy,” said Maybank Kim Eng analyst Aurellia Setiabudi, noting that there is room for more interest rate cuts amid soft inflation.

Bank Central Asia and Bank Rakyat Indonesia have already lowered promotional rates on fixed mortgages, with other key players expected to follow suit.

But the report warned that, should Indonesia’s growth cool below 5 per cent, “there will be inadequate job creation to absorb its additional labour force” and household incomes will fall.