Rancak Media – The recent 50-basis point hike in the BI-Rate to 5.25 percent is sending ripples through the property market, leaving Gen Z increasingly anxious about their prospects of purchasing a first home. As benchmark interest rates rise, mortgage rates are expected to follow, leading to higher monthly installments at a time when property prices are already skyrocketing.
According to M. Rizal Taufikurahman, an economist at the Institute for Development of Economics and Finance (INDEF), mortgage rates typically undergo gradual adjustments following a central bank rate hike. This trend inevitably increases monthly financial burdens, making homeownership feel further out of reach for many young professionals.
For Gen Z, the challenges extend beyond just fluctuating interest rates. They are currently grappling with a “triple threat” of soaring property prices, limited income growth, and a rising cost of living. “As a result, many young people are likely to postpone buying a home, opting to rent for longer periods or searching for more affordable housing in satellite cities,” Rizal told Jawapos.com on Tuesday (May 20).
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Despite the current economic strain, Rizal emphasizes that the central bank’s decision to raise interest rates is a calculated move intended to maintain the stability of the Rupiah and control inflation. The primary objective is to prevent broader economic pressures that could be even more damaging to the public in the long run.
“If the Rupiah continues to weaken and inflation spirals out of control, the purchasing power of the younger generation could be hit even harder,” he explained.
Rizal believes the current situation necessitates a proactive response from both the government and the banking sector to create more accessible financing schemes. “Strategic solutions could include targeted interest subsidies, lower down payment requirements, extended loan tenors, and the development of affordable housing integrated with public transportation. Such measures are essential to keep the dream of homeownership alive for the younger generation,” he added.
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The urgency of this issue is underscored by research from the Inventure institute in September 2024, which revealed that 65 percent of Gen Z do not feel confident in their ability to purchase a home within the next three years. This lack of confidence is driven by a combination of prohibitively high property prices, unstable income, the financial squeeze of the middle class, and competing financial priorities.
Summary
The recent increase in the BI-Rate to 5.25 percent has heightened financial pressure on Gen Z, as rising interest rates lead to more expensive mortgage installments. This economic challenge is compounded by a “triple threat” of soaring property prices, stagnant income growth, and a high cost of living. Consequently, many young professionals are delaying homeownership, often choosing to rent or relocate to more affordable satellite cities.
While the central bank’s policy aims to stabilize the Rupiah and control inflation, experts suggest that proactive government and banking intervention is necessary. Potential solutions include targeted interest subsidies, lower down payments, and extended loan tenors to improve housing affordability. Without such measures, significant portions of the younger generation remain pessimistic about their ability to secure a home in the near future.
