JAKARTA (Yosefardi) – Many parties now concern on the bubble in property sector following the recently announced plan of the Indonesian government to allow foreign ownership of luxurious apartments.
David E. Sumual, Chief Economist for Bank Central Asia, urges the government to monitor the development of property price and market. Such a jump in property price could lead into the bubble property.
David however said the current economy development might not prompt investors to expect the bubble potential in the property sector.
Indonesian government announced it will allow foreigners to own luxurious apartments with a minimum value of Rp5 billion (approx. US$384,615), meaning it needs to revise Government Regulation No. 41/1996 on Housing for Foreigners Residing in Indonesia which bans foreign ownership of all Indonesian property.
Currently, foreigners can only obtain property under the so-called ‘right of use’ category (no the ‘right of ownership’) for a maximum period of 25 years (but is renewable for an additional 20 years). It is expected that foreigners continue to fall under the ‘right of use’ category after the revision but with an open-ended duration as well as the right to be inherited by foreigners’ heirs.
Although there are currently relatively few developers that focus on the construction of luxurious apartment, several analysts claim that the move could boost growth in the domestic property sector by 20%. If so, then it will also imply a multiplier effect on the economy as other industries closely related to property – such as cement, ceramics as well as the construction work force – will grow accordingly.