The Homebuyer Behavior in China and Indonesia
The property sector in China started booming after market reforms in 1998. Responding to the high demand from an expanding middle class that considered housing as a major family asset and status symbol, there was a significant construction boom. Purchasing real estate as an asset has been viewed as a reliable and secure investment by Chinese consumers, and it has been until now.
Many Chinese from the middle and high classes go on to acquire second and even third homes. In addition to the expectation of future financial gains, owning property symbolizes better status in Chinese culture and is regarded as an important milestone before marrying and raising a family (Witte, 2021).
This is also proven by the fact that real estate accounts for about 70% of personal wealth in China. Their willingness to pay for properties is also relatively high, with residents in Beijing and Shanghai paying property prices comparable to those in San Francisco and New York, while earning just one-fourth of what Americans do.
The homebuyer behavioral trend in China is strikingly similar to what has been going on in Indonesia, where parents used to tell their children how important property investments are as a family asset. This is supported by the people's belief that investing in real estate would provide long-term benefits, since there is an expectation of increased middle-class consumer spending on the residential business segment, as well as urban society demand for flats and condominiums (Daryanto, Samidi and Siregar, 2018).
According to Statista, Indonesia's real estate market has increased over the previous decade, with property demand increasing every year in accordance with population growth.
What to Look Out For
China’s property crisis didn’t only shock disgruntled Chinese homebuyers, but it also shocked the world. Many people are claiming that China’s economy is about to fall, and some are even claiming it as a replication of the 2008 Financial Crisis. But while the hype of a declining rival superpower might be “fun” for some, the narrative doesn’t really stand true.
China's economy is unlikely to undergo such a severe economic meltdown. According to Teneo's Wildau and several other experts, Chinese authorities have far better control over the financial sector and the actual economy than US policymakers had in 2008. So they have the means to avert a major disaster.
On another note, while there is a pattern of comparable variables and features in the real estate climates of China and Indonesia, it is difficult to determine whether Indonesia will experience a similar crisis as China has lately. There are a lot of additional factors in play, and even comparable variables may not be the same. Nonetheless, as a developing country and one of the emerging property players, Indonesia must exercise caution in its real estate management.
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