Property Rule Easing Could Trigger Economic Bubble

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  • Kompleks perumahaan mewah di pinggir Pantai Mutiara, Pluit, Jakarta Utara. TEMPO/Dhemas Reviyanto

    Kompleks perumahaan mewah di pinggir Pantai Mutiara, Pluit, Jakarta Utara. TEMPO/Dhemas Reviyanto

    TEMPO.CO, Jakarta – The government's decision to allow foreigners to buy houses in Indonesia is creating concerns that it would lead to a property market bubble.

    "The government's plan will make property prices soar since there is this notion that foreigners have a high purchasing power," Martin Panggabean, head of economic and strategic investment advisory at IGIco told Tempo yesterday.

    According to Martin, a property worth Rp2 billion could be sold for Rp5 billion developers if foreigners are allowed to make the purchase.

    The price spikes would eventually cause a property bubble, and things will turn for the worse if the market is ridden with investors and speculator.

    Investa Mandiri analyst Hans Kwee agree that opening up Indonesia's property market to foreigners will put the country on a fast track to an economic bubble. 

    "The domestic property market slowdown is not caused by credit restrictions (LTV), but because of property prices that rise faster than the increase in purchasing power."

    The government plans to allow foreigners to buy property in Indonesia. Minister of Public Works and Public Housing Basuki Hadimuljono said the Finance Ministry is currently finalizing the law on property ownership by foreigners.

    To President Joko Widodo, housing developers association Real Estate Indonesia (REI) on Tuesday proposed that foreigners can have more freedom to buy property in the country.

    Bambang is confident that allowing foreigners to buy property in Indonesia will nourish the economy.

    SINGGIH SOARES | KHAIRUL ANAM | ANDI RUSLI