Property Prices Rise 1.49% in Q2 2021 Despite Sales Decline

Bank Indonesia (BI) reported that the Residential Property Price Index (IHPR) reached 215.77 in April-June 2021, a 1.49% year-on-year (yoy) increase. This growth was higher than the 1.35% recorded in the previous quarter.

However, sales of residential properties in the primary market during Q2 2021 experienced a year-on-year decline. House sales during this period contracted by 10.01% (yoy), a 13.95% decrease from the previous quarter.

This decline in sales volume in Q2 2021 occurred across small houses (contracting 15.40% yoy) and large houses (contracting 12.99%). Meanwhile, medium-sized houses showed slower growth at 3.63% (yoy).

The hampered growth in residential property sales is attributed to several factors, including rising construction costs, bureaucratic/permitting issues, mortgage interest rates, high down payment proportions in mortgage applications, and taxation.

According to the BI report, developers still rely heavily on non-bank financing for residential property development. In Q2 2021, 66.45% of the total capital required for housing projects came from internal funds. From the consumer side, bank financing through mortgages remains the primary choice for purchasing residential properties, accounting for 75.08% of total financing.