Indonesia’s property sector is seeing more activity now in the third quarter of 2016, pointing to a strengthening property sector in 2017. Experts said this development is partly supported by the government's tax amnesty program and the lower interest rate environment in Indonesia as well as Bank Indonesia's decision to ease the loan-to-value (LTV) ratio.
Bank Indonesia has also been eager to cut its benchmark interest rate this year. At the start of the year the BI rate stood at 7.50 percent. However, after several interest rate cuts and the adoption of the 7-day Reverse Repo rate (RR rate) as its new benchmark tool in August 2016, the key interest rate of Bank Indonesia now stands at 5.00 percent. This lower interest rate regime also has an impact on mortgage loans.
In combination with (government-led) infrastructure development - including toll roads, harbors, airports and power plants - it should all lead to the continuation of a strengthening property sector in 2017. Infrastructure projects are important because usually there emerge several property projects around a new infrastructure project.