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Indonesia: Millennials fail to benefit from slower rise in house prices
Millennials still find it difficult to buy houses despite the COVID-19 pandemic, which has impacted the property industry, as the threat of layoff looms amid a battered economy.
Dara Cantika, a 26-year-old private-sector employee in Surabaya, East Java, delayed her plan to buy a house, fearing a pay cut or sudden layoff, given rampant job cuts due to the pandemic.
“We may still be able to come up with the down payment, but I am afraid we might have difficulty paying the mortgage instalments in the long run, because we are exposed to the risk of losing our jobs and income,” Dara told The Jakarta Post via text message on May 18.
Millennial homebuyers, who account for two-thirds of the target market population, mostly look for houses with a price tag of around Rp 500 million (US$33,800), according to Real Estate Indonesia (REI). The millennial segment mostly settles for modest houses of 50 square meters (sqm) or 100 sqm with two bedrooms.
However, the pandemic, which has impacted consumer purchasing power and forced companies to lay off workers, has seen residential property sales drop by 43.19 percent year-on-year (yoy) in the first quarter, according to a quarterly survey by Bank Indonesia.
This is despite a slowing increase in house prices, as evident in the Residential Property Price Index (IHPR) that grew 1.68 percent year-on-year (yoy) in the January–March period this year, lower than 1.77 percent in the previous quarter.
Wendy Haryanto, the executive director of Jakarta Property Institute (JPI), a non-profit organization advising developers, said Thursday that the threat of job loss due to the pandemic added to a decline in demand among millennials that had begun last year.
“For those wanting to buy a house, this is actually a good chance to get a more affordable house,” Wendy said in a text message on May 21. “But millennial consumers are somewhat vulnerable to layoffs in the job market right now.”
Furthermore, she said, millennials could afford no more than Rp 3 million in monthly mortgage payments on average.
It is not that millennials lack the desire to own a property. According to online property marketplace rumah123.com, the number of searches on its website by potential homebuyers aged between 25 and 35 years rose by 27 percent in 2019.
Demand for houses costing less than Rp 500 million made up around a quarter of the total demand, but supply was behind by around 3 percentage points, according to a survey released in February by rumah123.com.
However, in 2019, sales of houses to millennials only reached 20,000 or 10 percent of the total sales, according to REI.
REI chairman Totok Lusida said on May 21 that developers remained eager to focus on millennial homebuyers.
“Despite the declining purchasing power, the opportunity in the market is still very big,” Totok told the Post in a phone interview. “Millennials are our target because they still have the power to buy a house right now.”
Developer Ciputra Group, for example, provides housing aimed at millennial buyers starting from Rp 180 million at its Citra Maja Raya complex in Lebak Regency in Banten.
Meanwhile, for the upper-middle class segment, the developer is selling houses starting from Rp 660 million at its 1,000-ha Citra Sentul Raya complex in Bogor, West Java.
Meanwhile, several national banks offer mortgages tailored to millennials.
State-owned lender Bank Mandiri, the country’s largest bank in terms of assets, loans and deposits, offers a conditional zero down payment and around 8 percent five-year fixed interest rate for a minimum tenure of 15 years, and 9.15 percent for 10 years.
Despite the current difficulties, such offers have enticed 26-year-old Christoffer Rafael, a copywriter based in Jakarta, to settle a down payment for a house by the end of the year.
Christoffer is looking to find a house in the Serpong area of South Tangerang, Banten, and he has been making calls to salespersons.
“Apparently, there will be a stimulus from the bank [for mortgages],” Christoffer said via text message on May 18. “Moreover, many developers seem to be getting ready to give discounts.”
— Riza Roidila Mufti contributed to this story.
Source: https://www.thejakartapost.com/news/2020/05/28/millennials-fail-to-benefit-from-slower-rise-in-house-prices.html