The Indonesian government has announced plans to raise the Value Added Tax (VAT) from 11% to 12%, effective in 2025. This policy is part of the government's efforts to increase national revenue and strengthen the national budget. However, this increase is expected to have a significant impact on various economic sectors, especially the real estate sector. Millennials, who are striving to buy their first home, will feel the direct impact of this increase.

Impact of VAT Increase on Property Prices

With the VAT increase from 11% to 12%, property prices will rise. For example, a house previously sold for IDR 500 million with 11% VAT has a total price of IDR 555 million. With 12% VAT, the total price of the same house will become IDR 560 million. This IDR 5 million increase may seem small, but for millennials who are still in the early stages of their careers and saving for their first home, any increase in costs can be a significant burden.

Purchasing Power of Millennials

Millennials, who will be between 25 and 40 years old in 2025, face various economic challenges, including stagnant wages, rising living costs, and student loan debt. With the VAT increase, their purchasing power to buy a house will be further eroded. This may lead many millennials to delay their plans to buy a house or seek more affordable alternatives, such as renting or purchasing property in suburban areas where prices are lower.

Solutions and Alternatives

To cope with this VAT increase, there are several steps that millennials and property industry players can take:

1. Better Financial Planning : Millennials need to be more meticulous in planning their finances. Consistent saving, managing debt wisely, and investing can help them cope with rising property costs.
2. Government Subsidy Programs : The government should consider subsidy programs or incentives for first-time home buyers. Such programs can help reduce the financial burden caused by the VAT increase.
3. Innovation in the Property Sector : Property developers can find ways to reduce production costs and offer more affordable housing without compromising quality. Additionally, developing properties in cheaper areas can also be a solution.
4. Alternative Financing : Banks and financial institutions can offer more flexible and affordable financing products, such as fixed-rate mortgages or long-term financing programs.
5. Financial Education: Education on financial management and investment should be enhanced so that millennials can better manage their finances and prepare themselves to buy a house in the future.

The VAT increase to 12% in 2025 will significantly impact the property sector and the ability of millennials to buy homes. Although this increase aims to boost national revenue, it is important for the government and industry players to consider its impact on the purchasing power of the public, especially millennials who are the future home buyers. With proper planning and policies, it is hoped that the negative impact of this VAT increase can be minimized and millennials will still have the opportunity to own their dream homes.

For the month of June, there is still a government promotion offering 100% VAT-free for only two more weeks. This is a great opportunity for both millennials and others to secure their dream home. In Yuu at Contempo, there is a VAT-free promotion of up to IDR 130 million.

Visit our Show Units of Type 72 and 90 every day from 9 AM to 5 PM for more information. You can also contact us at 0811 658 1108.