Indonesians Living Abroad, Thinking About Going Back

There is a massive boom at the moment and prices are going stupid, at least in Jakarta.
More when I'm on the comptuter.

Masfred, I saw --from other threads, that you're paying about $2.5K/year for a 3+1 beds in a patrolled estate. Which area are you living in?

There are lots of options. Though most of my friends who earn around 5- 6 mil a month are living in "exlusive kost" price range is 1,5 to 3 mio a month. Or sharing a flat with others.

House prices have doubled or more in the last 18 months.
This hasn't been matched by salaries so people are taking out bigger and bigger loans that many will have trouble paying back if there is even a small downward shift in their salary.
Retail sales are levelling out so shops are going bust or reducing costs.
New ruko/houses/shopping centres are being built but not being filled with anything as important as people.
In Serpong, there are literally hundreds of brand new, empty ruko but they're still building more. The buy or rental costs are way over anything a business can make money after paying these costs.

The latest, medium sized houses are for sale at up to Rp2.4 billion but many are rubbish quality and I wouldn't touch them with a bargepole.

However - there is a bright side for those of us with a brain.
Older estates, whist too expensive, are far less popular so you can get a 3 bed house for Rp22 to 30 million/year without much of a problem but still have security and so on.

That depends on where you want to live but I've seen many such places in BSD, Bintaro and other less 'in' towns.

As I mentioned - This is all built on credit and credit has to be repaid.
Now add the slow but sure loss of jobs as the economy starts to contract.
Now a killer. Many banks are lending to loan so, if too many loans are defaulted on, the bank can't pay its bills and will go bust as we've seen all over Europe and America.

So many people are telling me this can't happen but, if anyone fancies a small wager, say - the winner buys lunch for the loser, I'll take the bet.

I say, the Indonesian economy will suffer a crash within four years and  it'll be a ruddy big one.

Any takers?

Exactly, especially now that fuel prices have gone up another items price automatically adjusts ride that also adds to the anguish the middle to lower

mas fred wrote:

House prices have doubled or more in the last 18 months.
This hasn't been matched by salaries so people are taking out bigger and bigger loans that many will have trouble paying back if there is even a small downward shift in their salary.
Retail sales are levelling out so shops are going bust or reducing costs.
New ruko/houses/shopping centres are being built but not being filled with anything as important as people.
In Serpong, there are literally hundreds of brand new, empty ruko but they're still building more. The buy or rental costs are way over anything a business can make money after paying these costs.

The latest, medium sized houses are for sale at up to Rp2.4 billion but many are rubbish quality and I wouldn't touch them with a bargepole.

However - there is a bright side for those of us with a brain.
Older estates, whist too expensive, are far less popular so you can get a 3 bed house for Rp22 to 30 million/year without much of a problem but still have security and so on.

That depends on where you want to live but I've seen many such places in BSD, Bintaro and other less 'in' towns.

As I mentioned - This is all built on credit and credit has to be repaid.
Now add the slow but sure loss of jobs as the economy starts to contract.
Now a killer. Many banks are lending to loan so, if too many loans are defaulted on, the bank can't pay its bills and will go bust as we've seen all over Europe and America.

So many people are telling me this can't happen but, if anyone fancies a small wager, say - the winner buys lunch for the loser, I'll take the bet.

I say, the Indonesian economy will suffer a crash within four years and  it'll be a ruddy big one.

Any takers?

Crash within 4 years is based on? Interested to know your analysis. I think 4 years is too soon. Even though you are correct in terms of a lot of the developing is built on credit, I don't think the numbers of foreclosure will be as dire as the US.

My Balinese cousin lived in the US for almost 7 years to earn his undergrad and doctorate degrees...Penna and Chicago. 

He was horribly homesick, and when it was all done he couldn't wait to get back to Bali, even turning down an excellent professorship at the University of Illinois.

About building on credit...that's definitely not at all commonplace here in Bali…in fact it's quite uncommon.

Also, one can't even start to compare the housing bubble that occurred in the US with price increases here, at least in Bali anyway.  Unlike in the US where a homeowner is lucky to have 10% equity in their home, over here the norm is 100% equity, or in other words, we're not talking about houses of cards.

First, I hope, Mas Fred your wrong.But I wont take that bet. I'm 57 and have seen 2 big housing crashes in my adult life here in the USA.When I'm In Indonesia-3 times a year-it looks very familiar.don't think it cant happen,and don't believe all the bankers.Keep your debt low, save some money for a rainy day,and be smart.I hope im wrong because i love Indonesia,its my second home.

Phil, the housing market in the US and in Indonesia are two entirely different markets with little, if any, similarity. 

The primary difference is that way too much of the housing values in the US were floated by credit, and the credit itself became a traded commodity.  Home ownership in the US is primarily nothing more than a lease or rental scheme couched as ownership. 

During the last housing crisis in the US the news was full of people “loosing” their homes when in fact for the majority, all they lost was their equity in their home.  At the height of the housing market if someone had just purchased a $300,000 home with a 5% down payment and the value on that house fell to $200,000, and the bank foreclosed on their mortgage loan, they didn't lose $100,000, rather they only lost $15,000, viz their down payment…the consumer being protected from the banks from the additional $85,000 of the mortgage loan by bankruptcy laws and mortgage insurance.   

US consumers are way too reliant on credit to provide the means of ownership and that is not the case here in Indonesia, or at least not in Bali where I live.  Here the citizens primarily own their homes and have 100% equity ownership…not the banks. 

Also in Bali, residential compounds are never for sale.  You can drive around Bali all day long for weeks and never see a “di jual” (for sale) sign posted on the front of a Balinese compound.  These ancestral compounds which also hold their ancestral temples, are not regarded as an asset, and their monetary values are meaningless. 

There is simply no way that a housing crash akin to the last one in the US could occur here, so there is little point in worrying about it.

Bali is getting really crowded. Like Jakarta, without a proper infrastructure, I wonder how much longer both cities can last.

I do agree that the economy growth Indonesia is experiencing, won't last forever but I doubt the downfall will be as severe as US. I was thinking to invest in index, but IHSG is quite volatile, my heart is not prepared for that.

Any take about wise investment, Ubudian? Mas Fred? Phil? Ohers?

I agree, Bali is indeed getting very crowded especially in southern Bali where real estate development is on steroids.  However, with that said there are still plenty of areas of Bali which are not crowded and which offer great investment opportunities.  Those areas are in the central highlands, parts of eastern Bali and Nusa Penida.   

I hear comments about Bali's infrastructure a lot, but the truth is that there has been incredible improvements in our infrastructure in the past 15 years.  There also has been great improvement in the quality of public education and available medical care.  Anyone who has been on Bali in the last 10 to 20 years will tell you that the improvements are quite amazing.

My best tip for outstanding long term investment potential is land along the southern shore of Flores and Nusa Penida, Bali.  Both hold tremendous potential, and I predict a major SE Asian style casino (ala Macao or Singapore) in Nusa Penida within the next ten years.

I agree with Ubudian,real estate even in the USA rite now.Prices are down in most areas,and interest rates are as low as they can possibly get.If your going to live in that home even better,you invest and put a roof over your head.Just be smart about location.In real estate its all about location.

Thanks Ubudian and Phil,

I learn that for RE, it's better to have the properties near you or have someone you really trust live around those properties.

About the casino in Indo, I'm a bit hesitate whether it can be implemented. I'm sure you are aware how the extremist can go about, but then again when there's big money involved, to some, principles can be "diluted".

I agree totally with you about having someone trustworthy located near any land that one is investing in that isn't close by.  This is especially so for non-Indonesians who have little chance of winning any court battle over a land dispute.  However, you being Indonesian should have little worry about that.  For example, plenty of people in Java have purchased land in Bali and other islands far less accessible than Bali and disputes seem to be minimal.  Nonetheless it can be unnerving to have significant investments so far out of reach.   

As for the casino in Dusa Penida, my personal opinion is that the influence of more conservative or radical Islamic ideology in Indonesia will eventually diminish.  Hopefully this won't happened in any similar fashion as with what is currently happening in Egypt, but in time, and with ever increasing foreign investment in Indonesia, I think the writing on the walls is pretty clear.

I'd be amazed if Indonesia will allow itself to sit on its hands watching Singapore and Macao rake in the billions of casino revenue for very long before getting “on the band wagon” and playing their own tune.  Historically Indonesia has always been more aligned to a “wait and see” approach to change, but I'm willing to bet that a casino will eventually happen here in Indonesia and Nusa Penida, Bali is the obvious choice because of its current role as the tourism leader in Indonesia as well as the vastly majority Hindu make up of the populous.  Another aspect to factor in with this concept is the ever increasing semi-autonomous status that the Province of Bali is enjoying.  That too will only increase over time in my opinion.

Like they said, Ubudian, "it's all about the money". There was this horror case I've heard about a land purchase which turned out to be illegitimate. The new owner built a nice property and the next thing they know, the land was claimed by the original owner. Turned out the paperwork the new owner received was bogus. This happened to fellow Indonesians.

Thank you, properties are definitely checked on my portfolio.

What do you think about bonds and index? It's a bit too volatile to my liking, but I'm interested to hear your opinion and others too.

My Balinese wife plays the Jakarta stock market a bit and does quite well.  I don't play those markets myself, and I didn't way back when I lived in New York City. 

I should probably re-think my own investment strategies because the Jakarta composite has been performing very well over the past three years, outperforming the vast majority of all other exchanges world wide: 

http://asia.wsj.com/mdc/public/page/2_3 … tkidx.html

However, even as brilliantly as the Jakarta composite index has been performing over the past three years, it pales in comparison to real estate investments here.   

As an old farmer in Maine once told me, “land, they just ain't making it anymore.”