Impact of the Middle East Conflict on House Prices: Just 3.5 Per Cent

Geopolitical fault lines in global geopolitics, including the Middle East conflict between Iran–America and Israel, are driving higher energy and logistics costs. However, these pressures are not expected to significantly shake house prices in Indonesia.

Joko Suranto, Chairman of the Real Estate Indonesia (REI) Central Board, said that the impact of higher logistics costs on the property sector remains relatively contained. He noted that the rise in transport costs for building materials is not expected to exceed 10%.

‘When we talk about logistics costs, I think the increase will not reach 10%,’ he said at a breaking-fast gathering with 2,000 orphans from 10 foundations in Jakarta, on Thursday 5 March.

He explained that the structure of building costs means the impact of logistics on the selling price of houses is limited. Building components themselves account for around 35% of the house price.

With a logistics increase of 10%, the overall impact on house prices is estimated at around 3.5%.

‘If the house price is set at 35% of building costs, and there is a 10% logistics increase, then the impact is around 38.5%. That means it remains relatively measured,’ he said.

In addition, he noted that most building materials for housing construction in Indonesia are produced domestically. Industries such as cement, ceramics, and other construction materials already have many factories close to growth areas.

This condition makes cost pressures from global fluctuations manageable by developers.

‘Factories for materials are now widely located near property growth areas. So logistics costs remain relatively controllable,’ he said.

Imported materials, according to him, are generally used only in the luxury housing segment, and thus do not significantly affect overall house prices.

Therefore, Joko regards the property sector as still resilient to global economic dynamics. Developers are also believed to be able to manage risk of cost increases as long as price hikes are not extreme.

‘As long as the increases are not exponential, the risk can still be managed,’ he said.

In the face of global uncertainty, REI hopes the government maintains economic policy stability and drives the realisation of various development programmes, including the housing sector, so domestic economic activity keeps moving.

According to Joko, the property sector is still able to be a driver of Indonesia’s economic growth despite global uncertainty. The industry has historically contributed around 0.5% to national economic growth.

This contribution is driven by construction activity and investment that continues to move. In 2025, investment in the property sector was recorded at around Rp140 trillion, which also spurs activity across related sectors.

‘The property industry has a large multiplier effect because it relates to about 185 sub-sectors of the economy, from building materials to construction and services. When property development proceeds, various downstream economic activities also grow,’ he said.

He explained that property development not only creates construction activity but also stimulates growth in various downstream sectors. For example, when property areas develop, shopping centres, restaurants, and other business activities that absorb labour will emerge.

Therefore, he believes the property sector remains resilient in facing global economic dynamics, including geopolitical tensions that are affecting the global economy.

According to him, as long as government programmes in the economy and housing sectors can be realised well, the property industry can continue to contribute positively to national economic growth.

‘We still believe the government’s economic growth target can be achieved if the economic programmes run well and the property sector keeps moving,’ he said.

Joko believes the contribution of the property sector can be maintained, especially if government programmes in the economy and housing sectors can be realised well. Thus, the property sector is expected to continue supporting the national economic growth target around 5.5%.

Rising house prices continue to make homes less affordable, including for Gen Z. Meanwhile, income growth is very modest.

Property market trends in the Cinere and Pondok Cabe areas show rising house prices and limited new supply, making these areas increasingly attractive.

Property price growth and inflation are not keeping pace with income growth. Moreover, many working-age groups are trapped in the role of the sandwich generation.

The property market continues to grow, particularly in satellite areas around the capital such as Tangerang Regency and South Tangerang City.

Vertical housing such as condominiums and apartments near toll roads remains one of the main attractions for prospective buyers in the Tangerang Raya area.