The real estate market for apartment in Indonesia is facing a lukewarm response compared to neighboring countries, particularly Singapore. The Indonesian society is still accustomed to traditional housing and has reservations about living in high-rise buildings.
According to the recent Consumer Sentiment Study H2 2023 conducted by Rumah.com, apartments are not the preferred choice for living due to their smaller sizes, aversion to high-rise living, concerns about ownership status, and limited space for growing families.
Marine Novita, the Country Manager of Rumah.com, acknowledges that this trend has resulted in a surge in apartment searches from the younger demographic. The current size and layout of apartments are deemed less accommodating for families with children and those aspiring for more living space.
A significant contrast is observed in Singapore, where an impressive 80 percent of the population resides in apartments provided by the Housing & Development Board (HDB). Singapore’s apartments typically consist of four bedrooms and offer a total area of 95 square meters, surpassing the average space of most houses in Indonesia.
HDB, an institution under the Singapore Ministry of National Development, has established 26 housing developments in five regions of the country. Over 80 percent of Singapore’s citizens benefit from government-provided housing, with a remarkable 1.02 million residential units constructed by HDB.
Beyond the physical attributes of the units, Marine points out another differentiating factor between Indonesia and its neighboring countries, which is the level of interest rates and the rent-to-buy price ratio. The current average mortgage interest rate in Indonesia hovers at 8 percent, while neighboring countries maintain more competitive rates within the range of 3 to 5 percent.
However, she commends the government’s efforts in effectively managing inflation and interest rates amid the volatile global economic climate, as Bank Indonesia has maintained its benchmark interest rate at 5.75 percent.
Data from Rumah.com’s Indonesia Property Market Report Q2 2023 reveals an interesting trend in the demand for apartments in the DKI Jakarta region during the first quarter of 2023, with a slight decrease observed in Jabodetabek (Greater Jakarta). The demand index for apartments rose by 13.4 percent during this period, whereas the apartment supply index experienced a minor decline of 0.4 percent.
Simultaneously, the apartment price index showed a marginal increase of 0.9 percent. There was a quarterly increase of 15 percent and an annual increase of 3 percent in the demand for apartments during the first quarter of 2023.
Notably, the demand for apartments in DKI Jakarta surpassed the demand for landed houses, with a 13 percent quarterly increase, while landed houses experienced a 14 percent annual decrease.
Despite the upward trend in apartment demand, the overall demand for landed houses remains dominant, accounting for 91 percent of the total housing demand during the first quarter of 2023.
Leading property developers are hesitant to invest in apartment projects due to the ongoing impact of the pandemic, resulting in an uncertain vertical housing market. This situation has put pressure on the apartment sector throughout the year.
The rental prices of apartments in non-central business districts (CBDs) have remained stagnant, indicating the need for innovative strategies to stimulate the market.
Additionally, the increasing supply of apartment units is a result of various delayed projects being completed this year after pandemic-related setbacks. As the real estate landscape continues to evolve, finding a balance between traditional housing preferences and the growing appeal of apartments becomes crucial for the industry’s future growth and stability.