A man walks on Jan. 26 past the Sentra Mulya Jaya low-cost apartment in Cipayung, East Jakarta. Built as a joint project managed by the Social Affairs Ministry and the Public Housing Ministry, the apartment is available for low-income families to rent at Rp 100,000 (US$6) per month. - Photo: Antara
JAKARTA: he government may want to consider extending its 100 percent waiver on value added tax (VAT) for property sales to maintain demand amid a prolonged high interest rate environment, property consultancy Colliers Indonesia said on Wednesday (July 3).
The full waiver ended in June with the government only providing a half of tax cut in the second half of this year.
The government first implemented the waiver policy in 2021 and extended it until this year with a mix of full and half waivers.
Colliers said in a press briefing on Wednesday that the incentive had fuelled a surge in landed house sales.
Apartment sales had not experienced the same demand.
“The incentives have not significantly impacted apartment sales, leading some developers to delay launching new apartments and focus on landed houses instead, where demand remains strong,” Colliers Indonesia head of research Ferry Salanto said.
The programme waves the 11 percent VAT until the middle of this year and reduces it by half to 5.5 percent in the second half of 2024.
The VAT waiver or reduction only applies to the first Rp 2 billion (US$127,000) of the total price of commercial residential properties valued at no more than Rp 5 billion.
Apartment projects take longer to finish, Ferry added, but developers of landed houses were able to expedite construction to take on the full VAT waiver before the programme’s conclusion by the end of the year.
The second half of the year would present significant challenges, particularly for apartment developers in meeting sales targets amid the continued weakened demand over the past few years.
Having only half of the waiver would not prevent the challenges in the coming months and he projected apartment sales activity would continue to slow down.
“We don’t know [the reason] yet but we need further studies on why the incentives are not immediately used on apartment sales,” he added.
Apartment occupancy rates had shown some improvement in the second quarter, reaching 58.2 percent or up 190 basis points (bps) month-to-month (mtm) from 56.3 percent in the first quarter of 2024.
Compared with same period last year, it increased 120 basis points from 57 percent in the second quarter last year.
Meanwhile, a bright spot for the property market could be found in the rising demand for rental apartments, particularly from expatriates.
The trend, he said, was expected to continue through to the end of 2024, coinciding with the inauguration of the new government.
This trend had pushed rental prices up by 5-10 percent, with some deemed high-demand properties experiencing even greater increases of up to 15-30 percent.
“The prices are increasing as landlords are aiming to return prices back to pre-pandemic levels,” said Ferry. - The Jakarta Post/ANN
