Will Property Prices in Jakarta Plummet After the Capital Moves to IKN?

Odd-even system in Jakarta
DKI Jakarta

In a significant move, the capital city is set to relocate gradually to IKN Nusantara starting in 2024. This relocation is anticipated to impact various sectors, particularly the property market. Concerns have been raised about the potential adjustments in property prices within the city due to this significant change.

Colliers Indonesia provides insights into the short-term effects, stating that Jakarta’s property prices will not be immediately influenced by the capital’s shift to IKN.

Monica Koesnovagril, Head of Advisory at Colliers Indonesia, emphasized, “When discussing Jakarta, whether property prices rise or fall depends on the existing supply and demand, so it continues to rely on the market.”

Monica points out that the current development focus in IKN is primarily on essential facilities rather than commercial properties. As the population in IKN has yet to take shape, the dynamics of supply and demand are not yet evident.

For the time being, Monica suggests that the movement of property prices in Jakarta remains unaffected by the ongoing capital relocation process, particularly in the short term. However, she acknowledges the potential long-term implications for Jakarta’s property market.

“In the short term, the movement of prices can be considered independent of IKN. Still, there’s a possibility that, over time, it could have a significant impact,” she notes.

A noteworthy concern is the office sector, where the relocation might lead to an oversupply of office space due to the vacated government office buildings. Despite this, Monica assures that these buildings will be prioritized for the government’s needs in Jakarta or utilized by remaining state-owned enterprises.

Monica addresses the potential conversion of central government office buildings after the move to IKN. There is contemplation on whether these structures will be repurposed into residential spaces, such as flats or apartment buildings.

However, she emphasizes the complexity of such a conversion, stating, “It’s not as straightforward as converting empty ministry buildings into housing. There are various factors that need careful consideration.”

Monica highlights regulatory aspects, indicating that certain policies may need adjustments, particularly those related to the governance of the area concerning city planning and the mapping of office buildings.

On a technical note, Monica underscores the importance of assessing the impact of transforming office spaces into residential units. Therefore, the process of converting office functions into housing is deemed intricate and not an immediate undertaking.