Indonesia’s economic growth in the third quarter of 2024 slowed to just 4.95 percent, falling below the 5 percent mark. This slowdown is primarily attributed to a decline in consumer spending, a key driver of economic growth.
However, there is a silver lining as the government has introduced measures to stimulate consumption. One such measure is the extension of tax breaks for home purchases until the end of 2025. This is aimed at boosting consumer spending and, consequently, economic growth.
Decline in Household Spending
Indonesia’s Central Bureau of Statistics reported a decrease in the growth rate of household spending on housing during the third quarter of 2024 compared to the same period in the previous year.
Acting Head of the Central Bureau of Statistics, Amalia A. Widyasanti, acknowledged a year-on-year slowdown in household consumption growth.
In the third quarter of 2023, household consumption grew by 5.05%, while in the third quarter of 2024, it grew by 4.91%. Amalia explained that this was due to a slowdown in the growth of several components that support household consumption, one of which is the housing sector.
“Components of household consumption that have experienced a year-on-year slowdown, when compared, include housing and household equipment, transportation and communication, as well as restaurants and hotels,” said Amalia in a press conference in Central Jakarta on Tuesday, 5 November 2024.
Government’s Response to Economic Slowdown
Given the economic slowdown and its impact on the real estate and construction sectors, President Prabowo Subianto’s plan to reduce property taxes seems to be gaining traction.
Prabowo’s brother, Hashim Djojohadikusumo, has hinted that the government may abolish the 5% Land and Building Acquisition Tax and the 11% Value Added Tax on property.
President Prabowo also facilitates access to home ownership with a plan to extend the credit tenor from the original 15-20 years to 25-30 years.
Even though cutting property taxes would mean less revenue for the government, Hashim believes they can make up for it with increased income from a booming housing market.
Property developers and construction companies are excited about this plan because it is expected to boost demand in the real estate industry.
The Vital Role of the Property Industry
The property industry is a vital pillar of Indonesia’s economic growth. It has a significant multiplier effect on other industries, such as construction materials and furniture manufacturing.
The sector also employs a large workforce of 13-18 million people. Therefore, even amidst economic uncertainties, the property industry is expected to continue growing and remain a major contributor to the GDP.
Given its importance, no wonder the government has introduced various stimulus programs to revitalize this sector. One key initiative is the government’s collaboration with private developers to create more affordable housing options.
Foreign investment also plays a crucial role in the growth of Indonesia’s property market. The government has been actively promoting Indonesia as a potential destination for foreign investors, offering various incentives to attract capital inflows.
These incentives include relaxed regulations on foreign ownership of property and streamlined processes for obtaining necessary permits and licenses.
Opportunities for Investors
The government’s focus on sustainable development is another factor driving the property market. Are you considering starting a property business in Indonesia or investing in the housing market? Now is the right time.
Seven Stones Indonesia can be your trusted local partner to navigate the legal complexities. With a team of professionals boasting over 20 years of experience, Seven Stones Indonesia offers in-depth knowledge of the local real estate industry.
Get in touch with us via this Whatsapp number to discuss your business plan, or join our WhatsApp community here through this link to stay updated on Indonesia’s business dynamics.
