Millennials will drive demand for Indonesia’s landed housing
Landed housing is an important market segment in Indonesia and millennials are a vital demand source. Developers are targeting this demographic segment and adjusting their sales processes, especially in the wake of COVID-19.
As the world’s fourth most populous country, Indonesia ranks seventh in terms of total GDP (on a Purchasing Parity Parity basis and in current US$), owing to its young and numerous population. According to Indonesia’s Central Bureau of Statistics (BPS), about 50% of the total population in 2019 was at working age of between 20 and 54 years old, of which 84 million were millennials with significant purchasing power. Millennials represent a large proportion of the overall consumer market, and their impact on the economy and the property market is huge.
How millennials drive the property market?
Ready to settle down, millennials are entering their peak home-buying years, which means a growing demand for residential property. More than 4,800 landed houses were launched for sale alone in Greater Jakarta or JaBoDeTaBek (Jakarta, Bogor, Depok, Tangerang, and Bekasi) in 2Q 2020. It was around 26.3% more than new launches in 4Q2019 (JLL collects landed housing data bi-annually in Indonesia). In 2Q 2020, almost half of the units sold had an estimated average price between IDR 600 million and 1.3 billion (approximately USD 40,000 to 88,000), which is relatively affordable for some millennials.
Figure 1: Sold units in 2Q2020 by price (IDR)
Source: JLL Research, as at 2Q2020
Tapping into the millennials’ purchasing power
Since millennials are a key target market segment, developers need to tap into their purchasing power by offering products that complement their needs. Most millennials tend to communicate, shop and entertain with technology and digital devices. Technology seems to be a primary need for this age group, and it has the potential to add value to the core product. Smart homes and integrated applications that make life easier, energy-saving tools such as solar panels and other sustainability concepts are a response to the growing concern about health and wellness. Moreover, given the unprecedented disruption brought about by COVID-19, some millennials are likely to alter their financial behaviour and prioritise savings and long-term stability. Hence, owning ‘the right home’ becomes more important.
However, it is not enough for developers just to innovate their products, they also need to adjust how to better reach out to millennials. By responding to millennials’ behaviour patterns, purchasing power and health concerns, developers can more easily tap into this significant market, as well as differentiate themselves from competitors. As the pandemic unfolded in Indonesia, residential sales offices were temporarily closed and property viewing tours became almost impossible. The situation presented an opportunity for developers to embrace technology and shift focus to online. Some developers have switched to a digital sales process, with unit selection and transactions supported by virtual 360-degree tours, video viewings, online product knowledge and digital advertising through social media and online events.
COVID-19 has brought disruptions to the economy as never before, but it also offers an exciting opportunity to property developers to embraces new technology and caters to the needs of the millennial generation.