Inflation deflating indonesian property price boom

Indonesia’s housing market remains weak, despite strong economic growth and high levels of investment. Some of the major factors that have hampered the growth of Indonesia’s housing market are:

• High mortgage interest rates
• Foreign ownership restrictions
• High costs of building materials
• High tax rates
• Red tape in government

During the year to end-Q1 2011, residential property prices rose by 4.48%, according to the latest Bank Indonesia Residential Property Survey. But when adjusted for inflation, house prices actually dropped by 2.2% over the same period.

Small-type houses, measuring 36 square meters and below, experienced the most notable price increases of 5.2% (-1.5% in real terms ) year-on-year to Q1 2011. On the other hand, medium-type houses, measuring between 36 square meters and 70 square meters, had the smallest increase of 3.9% (-2.8% in real terms) over the same period. Large-type houses, measuring more than 70 square meters, saw average price increases of 4.4% (-2.3% in real terms) over the same period.

Source: NUWireInvestor.com