The Increase of Housing Demand in Indonesia
The rise of housing demand in the Greater Jakarta area has reached a significant level, whereas the estimation of housing demand will increase up to the year 2030 as the productive millennials are entering the housing market.
The rise of housing demand in the Greater Jakarta area has reached a significant level, whereas the estimation of housing demand will increase up to the year 2030 as the productive millennials are entering the housing market. According to the World Bank data of Gross Domestic Product (GDP), Indonesia is at the sixteenth of the highest of global GDP in 2019.
The government, through the Ministry of Public Works and Public Housing (PUPR) points out that since the housing sector plays a major role to support the continuation of the economic growth that was highly affected by the Covid-19 pandemic, people should not hesitate to buy housing from developers. However, people need to be extremely careful to avoid so-called developers and their jerry-built housing development.
Income rates have a huge part in housing demand, and with different income rates from different areas, the average household spending on housing is near twice as much as in the small urban area. Although housing is one of human’s needs and the biggest investment anyone can have—everyone, including newly formed families and millennials are finding their need to own a house. According to Bappenas in 2019, Indonesia as a developing country has more than 60 million millennials.
How does a public community drive the property market in Indonesia?
The population growth walks hand-in-hand with the housing growth, and with the millennials that are ready to enter the housing market—the increase of housing development is very straightforward. The developers are tapping into their property power to fill in the millennial market on housing demand.
House prices in urban areas tend to be more expensive compared to downtown areas. However, property developers are trying to make the ends meet with their market. These days, there are numerous affordable housings located in urban areas, including Jakarta. The government also has provided social housing that is more affordable for people with lower incomes. Although affordable housing or social housing might not sound promising, the government has set up several regulations that property developers need to follow, including creating access to clean water.
Will the housing demand continue?
The answer is yes, particularly Indonesia as one of the developing countries. The housing development is expected to keep rising for years to come—especially with the current ball game, whereas the needs of housings in the younger generation are rising, affordable housing is ramping up as well. Although house prices will continue to rise, the government is providing more affordable housing stock. As so, since the younger generation has reached the home-buying age, housing demands are likely to boost for the next several years as many look to purchase their first home.
What are the factors that account for the housing market demand?
There are several factors that chalk up to the housing demand. The housing market demand is highly affected by economic and population growth, interest rates, demographics, and income levels. For instance, the demand for houses tends to rise in the course period of economic growth.
Apart from economic factors, demographic factors play an important role in housing demand as well— including the population size and population growth, death rates, divorce rates, the number of children, etc. Also, the changes in demand and prices in the housing market can include new infrastructure, new public facilities or recreational facilities.
How do the housing supply and demand affect property investment?
Supply and demand is the most underlying idea of economics and the basis of a market economy.
Since house prices are moving in response to the changes in supply and demand, housing markets where the real estate demand is less sensitive to price changes are more ideal from an investment point of view. Because, if there are changes to the housing price, it will most likely decrease from demand.
On the whole, Indonesia’s housing demand is still expected to rise in the next few years, and the government is engaging for many to no longer hold back from buying a home. On the other hand, the government and stakeholders are working as one to collaborate in developing more affordable housing, but people are warned to be careful when purchasing a home.