In Indonesia, many young adults dream of owning property one day, but often postpone the decision, hoping that property prices might someday crash. But is that realistic? Has Indonesia ever experienced a property bubble burst like in the United States (2008) or China in recent years?
Let’s explore this in detail based on actual discussions from real estate communities, investor circles, and macroeconomic observations.
Do Property Prices in Indonesia Ever Drop?
On the surface, property prices in Indonesia especially for new developments seem to always go up. But what’s actually happening is a mix of developer pricing strategy, inflation, and subtle market stagnation. The illusion of constant growth in Indonesian real estate is maintained by strategic tactics rather than organic demand alone.
When people say “property prices in Indonesia never drop,” they’re partially right but only in the primary market. The secondary market, which involves resales of existing homes, tells a different story.
Property Prices Are Quietly Stagnant or Falling
Many Indonesians believe that buying property is a guaranteed investment, but the reality is more complex. While developers continue to launch new clusters at higher price points, the size of the units often shrinks. For instance, a developer may sell a 20x20m house for IDR 2B today, and in the next phase, offer a smaller 17x17m unit for IDR 2.3B. It gives the impression of rising prices when in fact you’re getting less.
Meanwhile, apartment prices have been declining in many areas. Units bought for IDR 230 million in 2018 are now being sold for IDR 140 million or sitting idle for years without buyers. Even in Jakarta, South Jakarta apartments once considered hot investments now stay vacant for months, even years.
This silent correction is happening especially in the secondary market, where owners quietly lower asking prices without making noise in the headlines.
Is There a Property Bubble in Indonesia?
The short answer is: not in the traditional sense. A real estate bubble typically involves massive speculation, excessive bank leverage, and panic selling when the market corrects. This happened in the US with subprime mortgages and in China due to overbuilding.
Indonesia’s property market, on the other hand, is largely supported by end-users (first-time homebuyers) rather than speculators. Mortgage (KPR) approvals are also heavily regulated, limiting over-leveraging. Thus, Indonesia doesn’t quite meet the criteria of a typical property bubble economy.
However, that doesn’t mean there’s no risk. The Indonesian property market is currently sluggish. Sales are slow, discounts are offered quietly, and the cost of maintaining idle properties is rising. These are all signs of a cooling market - even if it hasn’t “burst.”
Why Property Prices Rarely Crash in Indonesia
Let’s break down the reasons:
Low Market Liquidity
Real estate in Indonesia is illiquid. Homes aren’t sold quickly, and even desperate sellers (BU: Butuh Uang / Need Money) struggle to find buyers
Cultural Preferences
Many Indonesians see property as a long-term asset either to live in or to “store” wealth. It’s a mindset driven by a lack of trust in financial assets and inflation concerns
Developers Control Pricing
Developers rarely lower prices directly. Instead, they offer hidden discounts such as waived DP, free tax (PPN), free furniture or zero-interest installments. This preserves the illusion of stability
Inflation Distorts Price Perception
Even if the actual market value drops, the nominal price of property may still go up due to Rupiah depreciation and inflation. Hence, “prices never fall” becomes the default belief
Secondary Market Is Where Prices Actually Drop
If you're looking for signs of price corrections, look no further than the secondary market. Here, homeowners who can't afford to maintain vacant homes (tax, maintenance, renovation, etc.) are selling below purchase price.
For example:
- Homes in luxury areas previously sold for IDR 4B are now listed at IDR 3.2B
- Apartments once worth IDR 800 million are now struggling to find buyers at IDR 600 million
These cases are not publicized like a bubble burst, but they reflect real stress in the housing ecosystem.
Should You Wait for a Property Crash?
If you’re waiting for a dramatic price drop like the 2008 U.S. housing crash, you might be disappointed. Such a scenario would likely require a national-scale economic meltdown, mass layoffs and widespread KPR default - none of which anyone wants to happen.
What’s more realistic is watching for:
- BU sellers in the secondary market
- Small but meaningful price corrections
- Incentives from developers that effectively lower prices
In other words, don’t expect a crash. But be ready when opportunities arise.
Renting vs. Buying: A Rational Calculation
Let’s put things into perspective:
If you can rent a home for IDR 30 million/year, while the house costs IDR 1.5 billion to buy, you're effectively paying just 2% of the property’s value per year.
With IDR 1.5 billion in hand, you could:
- Invest in a 6% return government bond (SBN)
- Deposit in a high-yield digital bank account
- Get 5-6% in money market mutual funds (RDPU)
That return can cover rent for multiple years while keeping your capital liquid and flexible. This is why more young professionals are choosing to rent, delay homeownership or live with parents to save money.
Demographic and Social Shifts Affect Demand
In addition to financial reasoning, social dynamics also shape property demand:
- Delayed marriages and rising cost of living reduce urgency to buy
- Urban migration continues, but new developments are often far from economic centers
- Many homes sit empty as children move out or inherit unused properties
The result? Many properties are idle or underutilized, pushing down their real value even if nominal prices appear steady.
Property Prices Rarely Crash, but They Do Slip Quietly
Indonesia has never experienced a nationwide property crash - but signs of weakness are visible, especially in the secondary and apartment markets.
Rather than expecting a visible bubble burst, buyers should:
- Monitor BU listings
- Compare renting vs. buying carefully
- Account for inflation and investment opportunity cost
Waiting for prices to fall is not a bad strategy as long as you’re aware that property corrections in Indonesia happen quietly, slowly, and selectively. The key is to be patient, rational and opportunistic.