JAKARTA, KOMPAS — In Indonesia, housing remains an unresolved problem. Current data shows a backlog of around 11.4 million housing units. Each year, the housing demand increases by around 800,000 units.
On the other hand, Indonesia has enjoyed a demographic bonus since 2015, with the majority of the population within the productive age of 15-64 years old. According to Central Statistics Agency (BPS) data, the productive age population of Indonesia was around 176.8 million in 2017, or around 67 percent of the total population of 261.8 million. Of that number, around 80 million people are of the millennial generation, or people born in 1980-1999.
The increase in the productive age population is relative to the growth of the urban population. According to the World Bank, around 52 percent of Indonesians lived in urban areas in 2014. It estimates that 68 percent of Indonesians will be living in urban areas by 2025.
Rising demand in housing is inevitable under such a condition.
“Going on a holiday is important, but owning a house is still a priority. I’d thought of buying a house since I was single. It was just a question of how to save money,” said Novita Rahman, 32, a resident of Pamulang in South Tangerang, Banten, who bought a house two months after getting married.
However, after buying their house, the couple chose to live with Novita’s parents, about 2 kilometers from their own house. They cannot live in their house because it still needs furnishing, which is expensive. Most of their savings was used to pay the down payment for the Rp 868 million house.
Since getting married five months ago, Atika Permatasari, 25, and her husband have been planning to buy a house. However, they have been unable to because houses in Jakarta are unaffordable. Affordable houses are located in the suburbs, some 60 minutes from Atika’s office on Jl. TB Simatupang in South Jakarta.
“I used to spend the money on travel. I did not think about saving to buy a house. Now, owning a house is a priority,” said Atika.
Imbalance
Property consultant Savills Indonesia said that around 46 percent of Jakarta’s millennial generation had monthly salaries of less than Rp 4 million. Meanwhile, around 34 percent had salaries from Rp 4 million to Rp 7 million, 14 percent had salaries of Rp 7 million to Rp 12 million, and only 6 percent had salaries of more than Rp 12 million per month. Given that the average price of a house in Jakarta is over Rp 400 million per unit, a minimum salary Rp 8 million per month was needed to buy a house in Jakarta.
Based on data from the Office of the Coordinating Economic Minister, the price of houses in Greater Jakarta increases by an average 20 percent each year. That figure surpasses the annual salary increase of an average 10 percent. Meanwhile, the average minimum salary in Greater Jakarta is Rp 3.1 million per month, or 8 percent of the average land price.
The gap between the increases housing prices and salaries is widening. Given the discrepancy between salaries and housing prices – as well as the annual price increase – the millennial generation is finding it difficult, or even unable, to buy a house.
Rumah123.com country general manager Ignatius Untung, in his “Property Outlook 2018” presentation, said although the middle-income segment was earning a salary that was higher than the minimum wage, middle-income people still found it difficult to buy non-subsidized houses because of their high prices. Meanwhile, the low-income segment enjoyed a housing subsidy from the government.
Choosing to delay purchasing a house would mean that housing prices would only be higher and unaffordable. A Rumah123.com study showed that delaying for a year to buy property would mean a 4-8 percent loss in people’s purchasing power. For example, if a person delays for a year to purchase a 100-square-meter house, by the following year, they would only be able to purchase a 92-square-meter house for the same price.
Suburbs
Millennials in other big cities are also facing difficulties in purchasing their own home. They are faced with high prices for houses in the city center. Even if they purchased a home through loans, they still have to save money for the down payment.
Siti Fatimah, 27, a resident of Semarang, Central Java, said in order to buy a house through a loan, she needed to save Rp 30 million to Rp 50 million for the down payment. As a private employee, she received a monthly salary of Rp 3 million. “According to my calculations, I can start saving money for the down payment only after four years of work. I would also have to borrow from my parents,” she said.
Meanwhile, Angling Adhitya, 28, opted to buy a house in the borderland suburb between Semarang and Demak. Every day, he spends 60-90 minutes commuting between his house and office in downtown Semarang.
Brilliant Johan, 36, an employee of a state-owned company in Surabaya, bought a house in Mojokerto, 50 kilometers from Surabaya. He said it was more affordable. He purchased the house in 2014 for Rp 300 million through a 20-year loan.
East Java Housing and Residence Developers Association chairman Supratno said 10 years ago, the price of a 36-square-meter house in Surabaya was Rp 200 million. Today, the price of a house in a Surabaya suburb was at least Rp 800 million.
Meanwhile, Widya, 29, a private employee in Medan, decided to buy a subsidized house for Rp 155 million. The house is located in a suburbs of Medan, about 30 minutes from her office.