Indonesian real estate boom pulls property stocks

Indonesia property boom

Strong demand is attracting an inflow of local and foreign investments in construction and real estate companies’ stocks in Indonesia. With good perspectives for the coming years and interests from both local and foreign investors and developers, the real estate sector provides very interesting opportunities in Indonesia.

Like real estate in Myanmar, the Indonesian property sector is currently experiencing a booming cycle. Bloomberg’s Haslinda Amin reports on the repercussion of this activity on property developers’ stocks as well as the reasons behind this dynamism.

Indonesian property developers stocks

Indonesian real estate companies’ stocks present a very attractive profile for investors with significant upside in the coming months and years:

  • Indonesian property developers’ stocks have seen a 25% increase over the past 12 months, which is double the gains of the Jakarta Composite benchmark index – JCI.
  • Indonesian real estate developers currently have the best analysts’ ratings in the world, with 100% “buy” ratings and great interests for stocks of companies like Lippo Cikarang, which is up by more than 34% over the last year, or Alam Sutera.
  • The market is expecting another 14% increase over the next year, as the real estate stocks are currently traded at a 10% discount compared to other stocks in the JCI.

Reasons of the real estate boom in Indonesia

Foreign and local investors’ demand for property is strong, and the Indonesian demography and economy present very attractive trends for the sector in the coming years and decades, especially as the Indonesian middle class is expected to grow to 140 million by 2020.

  • The Government of Singapore Investment Corporaction – GIC, Singapore’s sovereign wealth fund, has invested 500 million USD in Indonesian property projects in November 2014.
  • Indonesia’s state pension fund has been investing in the country’s real estate projects for affordable housing and the government has plans to spend a lot on the construction of housing projects.
  • Demand from low-income workers is expected to increase five-fold.
  • Urban growth rate in Indonesia is the world’s third fastest.
  • Jakarta’s population should increase to 12 million by 2030.

Bloomberg video from April 2015

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