Monetary Policy and the Housing Market in Indonesia: Evidence from Selected Regions

Abstract

The housing market in Indonesia tends to have different characteristics in each region. Facing the credit risk in the housing market, the government has carried out macro-prudential policy concerning mortgage loan for housing and apartment through Loan to Value (LTV) policy. The aimed of this study analyze the effect of LTV policy and regional economic indicator on the house prices in Indonesia, compare the impact of LTV policy and indicator on the types of houses and regions. We used secondary data from eight regions which derived from residential property survey and statistics Indonesia at a monthly frequency. In processing estimated data using Generalized Least Square (GLS) Fixed Effect Model (FEM) to ascertain the effect of LTV policy in each region. The result showed most attributes had a significant effect on housing prices. However, LTV had no significant effect on every type of housing (small, medium, and large). The LTV policy spatial in accordance with housing market condition in each region.

Clustering and regional growth in the housing market: Evidence from Indonesia

“…The estimation results (Eq. 1, 2, 3, 4) show that the LTV ratio has no effect on house prices in Indonesia, this is supported by (Nugroho et al, 2018). This result is in line with (Glaeser et al, 2014) and (Del Negro & Otrok, 2007) who find that housing market conditions in a certain region are generally not influenced by national factors, but rather are influenced by local factors.…”

“…As a country with thousands of islands, Indonesia encounter problem on housing market development. The local characteristics of the housing complex lead to the differences in the development of the housing market in each region (Hernández-Murillo et al, 2017;Nugroho et al, 2018;Tuzel & Zhang, 2017). Rising property prices during periods of high credit growth will lead to excessive expectations and speculative motives.…”

“…Ariyanto Adhi Nugroho, Muhammad Yusuf Indra Purnama, Laela Rizki Fauzia | 85 | complex lead to the differences in the development of the housing market in each region (Hernández-Murillo, Owyang, & Rubio, 2017;Nugroho, Purnama, & Fauzia, 2018;Tuzel & Zhang, 2017). Different characteristics of the housing market in various regions in Indonesia require spatial/cluster policies that can be adjusted to the conditions in each region.…”

The Role of Monetary and Macroprudential Policy Instruments on Macroeconomic Stability in Southeast Asian Countries

“…The 2010 -2020 annual panel data research used the Panel Ordinary Least Square (POLS) method. The adoption of the general POLS model from Caecilia Wahyu E.R in 2008 and Nugroho, Purnama, and Fauzia in 2018 in this study is written as follows [16], [17]:…”