In a report published on Monday titled, “Indonesian Property Development Through the Lens Of China’s Experience,” the international rating assessor points out a similar stage of development of Indonesia’s property market with development in China, now is a more mature market.

Standard & Poor’s credit analyst Kah Ling Chan said the overall property market in Indonesia is, by size, much smaller than China’s and it differs in their stages of development, regulations, and market dynamics, “but a comparison of the sectors in these countries is meaningful for investors.”

Indonesia is the world’s fourth most populous nation with around 250 million population and China is the largest with more than 1.3 billion population.

“We expect Indonesian developers to largely go through the same credit trends as the cycle expands and matures,” Chan said. According to the S&P’s report, Indonesia’s property sector is still at “a high-growth stage” on the back of the country’s rising household income, growing population and expanding middle income class, which led to roughly 15 million units of housing shortage.

The ratings agency expects Indonesian developers to get 10 percent to 15 percent sales growth for the full-year of 2015.

It was lower than most developers’ target of 20 percent, despite most of developers still met their targets in the first quarter of this year.

Still, Indonesian developers have limited funding channels to answer the housing shortage and pay for the land acquisition, which push them to tap the low-rate US bond market and make themselves prone to currency risks.

S&P noted that the current property market boom in Southeast Asia’s largest economy dates back to about 2010, where only a handful of major players dominate the industry.

Some years ago, many developers in the archipelago nation focused on landed housing, using land reserves acquired when land costs were low.

The trend has changed now, as the rating agency pointed out that developers are increasingly building high-rise apartments to boost volume and maximize the value of their land banks, instead of building landed properties and low-rise apartments.

S&P noted the property development is most active in Jakarta, the capital city, home to the bulk of the middle-class population resides.

However, the agency highlighted the poor transportation infrastructure in the capital, which has led to slow traffic and long commutes, is “a key impediment to growth”.

China experience

Developers in China, on the other hand, have gone through a longer growth phase since the government liberalized the housing market in early 2000s.

“The market also benefited from strong economic growth, infrastructure development, and rapid growth in mortgage financing by banks,” S&P’s report said.

However, S&P said, as developers in the world’s second-biggest economy, had gone through the booming period, developers now facing large unsold inventories and have seen their leverage rose significantly in 2014 when the overheated market started correcting.

After negative rating actions, the S&P’s doesn’t expect the credit profiles of most Chinese developers to recover until 2016.

“Selling prices are slowly on the mend [in China], particularly in higher-tier cities. Sales are likely to have bottomed out in the second quarter [of this year], so we expect the market to recover in the second half, with support from more project launches and lower mortgage rates ahead. However, profitability will continue to weaken given the flagging prices since early 2014,” S&P’s report said.

“We expect average prices in China to be flat to 5 percent lower in 2015 with no volume growth. This effectively means that sales, in value terms, are likely to range between minus 5 percent to flat,” the report said.

“In our view, the experience of Chinese property developers, which have entered a matured phase, provides context for Indonesian developers’ growth strategy and financial management,” Chan said.

S&P provides ratings assessments for five Indonesian developers: Alam Sutera Realty, Kawasan Industri Jababeka, Lippo Karawaci, Modernland Realty, Pakuwon Jati.