Why are housing prices in Jakarta could be so expensive?


As written by the Jakarta Property Institute (JPI), 'World Bank Time To Act 2019' research revealed that Jakarta has the most expensive housing prices in the world. This study uses the ratio of the calculation of house prices to the income of the population. The housing price in Jakarta even outperforms other megapolitan cities in the world such as London, Singapore, and even New York.

Why are housing prices in Jakarta could be so expensive?

Occupancy supply restrictions

Program Director of the Jakarta Property Institute, Mulya Amri, explained that there are restrictions on the floor area that can be built in Jakarta. This will, of course, create a limitation on the supply of housing.


Courtesy photo of The Conversations

"In fact, the demand for housing in Jakarta is very high. The imbalance between supply and demand is what makes property prices soar," she said.

Mulya says the occupancy supply restrictions have forced the local government to limit the floor area that can be built. In fact, the government should be able to increase occupancy supply by building fast and mass public transportation.

Other things that can be done by the city government, by distributing clean water through pipes and providing green open spaces.

"Failure to increase the carrying capacity of the city ultimately results in the limited supply of housing for the community," she added.


The scarcity of land

The developer also needs to provide cheap flats for people as much as 20 percent from commercial area built. Unfortunately, the developer has difficulty doing that because of the limited land that is available.


Photo Courtesy of Resilient Cities Network

“Area for building flats need to be provided by local government, but they can’t give enough space for it,” Mulya said. This makes an accumulated debt by the developer. Thus, to get a Certificate of Feasible Function (SLF) is longer than usual, as well as in operating building that in the end should be a delay. 


The complicated building permit process

The licensing process for the construction of large buildings for residential purposes is said to be quite complicated and takes quite a long time. This makes housing prices in Jakarta tend to be high. The process of applying for a building permit (IMB) is expected to contribute to the increase in the price of houses in Jakarta purchased by the public from developers.


Photo Courtesy of The Jakarta Post

According to the Jakarta Property Institute, the increase could reach around 8 percent. "This is not a small amount," said Mulya.




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