Joko Widodo - Maruf Amin

JAKARTA (TheInsiderStories) – CBRE Asia Pacific Research in its latest report said the victory of incumbent Joko Widodo in the April 17 presidential election would stimulate a gradual resumption of Indonesia’s property market activity.

Although the results announced by the General Election Commission on May 21 were sued by opposition leader Prabowo Subianto at the Constitutional Court, CBRE assessed that Widodo now possesses a strong mandate to follow through on his main campaign pledge of continuing to develop and complete massive new infrastructure projects.

Widodo, who in his second period paired with Maruf Amin won the election with 55.5 percent of his contender Subianto and his running mate Sandiaga Salahuddin Uno, according to GEC calculations. If he wins the dispute at Court, Widodo will be inaugurated for his second and final five-year Presidential term on October 20.

CBRE saw, national investment in infrastructure has lagged for several decades, prompting Widodo to prioritize infrastructure spending in his first term, which saw significant investment in new highways, railways, airports, and seaports across the country.

While not all projects have proceeded smoothly, according to CBRE, notable successes include the First Phase of the Jakarta Mass Rapid Transit (MRT) system, which opened for general use in March this year. It is hoped the MRT will alleviate the city’s traffic gridlock as well as unlocking new areas for investment and development.

CBRE said, most investors moved into wait-and-see mode well ahead of the election, meaning that market activity has been extremely limited for the past year. However, recent months have seen an uptick in land banking, project planning and inquiries for en-bloc assets from local and foreign investors anticipating a Widodo victory.

“Provisional figures released shortly after polls closed on April 17 pointed to a Widodo win and boosted market sentiment. Confirmation of his victory is expected to result in the greenlighting of real estate projects as investors look to capitalize on the next five-year program of infrastructure spending, particularly in areas outside Jakarta,” CBRE noted.

Inquiries from overseas buyers have been especially strong in recent quarters, with many groups engaging in discussions to form joint ventures with local developers to co-develop new residential schemes in Greater Jakarta. In contrast to their previous short-term view towards Indonesia, many foreign investors are now adopting longer-term investment horizons of 7-10 years.

In terms of specific measures directed at the real estate market, CBRE reported, Widodo’s administration has indicated that it intends to reform tax regulations related to luxury and super luxury residential property, a move that should benefit sales activity in these segments. However, such measures are unlikely to be introduced until 2020 at the earliest, as the formation of the new administration will not be completed until later this year.

Among other sectors, growth in logistics demand will continue to attract foreign investors seeking opportunities to purchase high-specification warehouses, but the shift towards e-commerce is likely to weigh on shopping mall development and demand.

“On the leasing side, Widodo’s win will provide reassurance to office occupiers, with demand in Jakarta expected to remain solid, led by the TMT and coworking sectors,” CBRE ended.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com

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