Published on and written by Cyril Jarnias
The Impact of the War in Ukraine on the Indonesian Property Market
The impact of the war in Ukraine, though thousands of kilometers from Indonesia, is being felt all the way to the archipelago’s property market. As global economic sanctions and supply chain disruptions increase, Indonesia is seeing its real estate sector come under unexpected strain.
The surge in construction material prices, linked to instability in international trade, poses major economic challenges, complicating the task for property developers and amplifying uncertainties for investors.
This article explores how this distant geopolitical crisis has a ripple effect on the Indonesian property market and the scale of the economic upheaval to come.
Consequences of the Ukrainian Crisis on the Indonesian Property Market
The Ukrainian crisis has had a noticeable impact on the Indonesian property market, particularly in Bali and major cities, through several channels of influence.
Changes in Foreign and Domestic Investment
The war in Ukraine has caused a reorientation of international real estate investment flows towards markets perceived as more stable or alternative. Indonesia — especially Bali — has benefited from this influx, attracting more foreign investors seeking to secure their assets outside conflict zones.
Since 2022, the composition of buyers has diversified: beyond the classic residential tourism (Australians, Western Europeans), there is a notable increase in investors from Russia, Ukraine, and also the Middle East.
However, this positive dynamic for international investment locally clashes with purchasing power under pressure among Indonesians (recent layoffs, persistent inflation), limiting the progress of the domestic market.
| Buyer Profile Before 2022 | Buyer Profile Since 2022 |
|---|---|
| Mostly Australia/Western Europe | Diversification: Central/Eastern Europe (Russia/Ukraine), Middle East |
Price Evolution and Availability of Construction Materials
The Ukrainian conflict has disrupted certain global logistics chains. In Indonesia, as elsewhere in Southeast Asia:
- Prices of imported materials (steel, aluminum) have increased due to the domino effect of the global surge linked to economic sanctions and logistical disruptions.
- Occasional delays or shortages have been reported for certain materials essential to new construction.
- This weighs on the final cost of real estate projects as well as their delivery schedule.
Summary list:
- Significant increase in overall construction costs
- Temporary tensions on steel/aluminum supply
- Partial adaptation through increased use of local supply chains
Influence on Residential and Commercial Demand
Foreign demand remains strong in dynamic tourist areas (Bali). Investors are increasingly seeking high-end rental properties or secure second homes.
In the urban commercial sector (Jakarta…), the global economic slowdown is temporarily hindering new international establishments; nevertheless, certain segments still benefit from post-pandemic momentum.
On the domestic front: economic uncertainty negatively affects confidence and therefore local residential demand.
Strategic Reorientation of Property Developers
Faced with these upheavals:
- Many developers are accelerating their focus towards a diversified foreign clientele,
- Some are adjusting their offerings towards products more resilient to economic uncertainties,
- Others are investing in urban or tourism innovation to capture new international demand.
Adaptive list:
- Increased development of the premium/short-term rental segment
- Upmarket shift in certain coastal cities
- Innovations to optimize costs/local materials
Induced Macroeconomic Effects
Global economic conditions influenced by the Ukrainian crisis indirectly but strongly affect the Indonesian market:
| Factor | Primary Effect |
|---|---|
| Inflation | Reduced purchasing power – rising property costs |
| Interest Rates | Restrictive monetary policy = less accessible credit |
| Confidence | Lower consumer morale = postponement of major purchases |
Increased volatility also reinforces regulatory uncertainty around certain foreign investments; this can temporarily slow down some projects or major transactions despite structurally strong interest in this emerging market.
Key takeaway:
Indonesia remains attractive to international investors seeking refuge outside Eastern Europe. However, imported inflation and logistical tensions stemming from the geopolitical context weigh on both supply and domestic demand — forcing local and foreign players to adjust their strategies in a volatile global environment.
Good to know:
The Ukrainian crisis has indirectly influenced the Indonesian property market through several mechanisms. Foreign investments recorded a notable decline, primarily affecting large-scale international real estate projects, while domestic investments had to contend with rising construction material costs, exacerbated by shortages of certain imported raw materials. These issues have led to an increase in property prices, both residential and commercial, even though demand remains strong in major urban centers. Developers are reorienting their strategy towards mid-range projects to attract a broader clientele, while optimizing the use of locally available materials. On the economic front, uncertainties related to the global situation have led to fluctuations in interest rates, impacting individuals’ borrowing capacity and consumer confidence. For example, for an apartment in central Jakarta, prices have risen by an average of 15% in one year, an unprecedented phenomenon since 2015, while some developers are choosing alternative materials to avoid price volatility.
The Impact of the Influx of Ukrainian Refugees on Housing in Indonesia
The war in Ukraine, triggered by the Russian invasion in February 2022, has led to a major humanitarian crisis and a massive exodus of the Ukrainian population. Millions of people have fled the fighting and destruction, seeking refuge primarily in neighboring European countries, but also in other regions of the world.
Current Political and Humanitarian Situation in Ukraine
- Intensification of fighting since 2022.
- Rapid deterioration of civilian infrastructure (housing, healthcare).
- Massive human rights violations.
- Over 5 million refugees registered across Europe; approximately 6 million additional internally displaced persons.
Estimated Number of Ukrainian Refugees Arriving in Indonesia
To date, most Ukrainian refugees have settled in neighboring European countries or EU member states. Available data does not indicate a significant flow towards Indonesia:
| Country | Estimated Number (May 2025) |
|---|---|
| Germany | ~1,200,000 |
| Poland | ~1,000,000 |
| Indonesia | The property market could see locally increased pressure on specific urban segments. |
More structured national strategies would then need to be implemented:
- Accelerated development of the social/temporary rental housing stock,
- Strengthening of educational/intercultural programs,
- Increased involvement of private real estate players through tax incentives or public-private partnerships.
In summary, although marginal today compared to neighboring European countries, any significant increase would require rapid adaptation at both the urban and national levels.
Good to know:
The war in Ukraine has caused a massive exodus of refugees, some of whom have found refuge in Indonesia. Although Indonesia is not the preferred destination, recent figures indicate that several hundred Ukrainian refugees have settled there. This influx is putting pressure on the property market, particularly in Jakarta and Bali, where demand for rental housing has increased, leading to higher prices. Challenges include the socio-economic integration of refugees as well as the limited availability of affordable housing, while opportunities present themselves in the form of cultural diversification and economic stimulation. The Indonesian government, in collaboration with NGOs, is developing initiatives to encourage reception and social integration, but tensions may arise if the influx continues to increase without adequate infrastructure. Future developments will depend on the persistence of the Ukrainian crisis and Indonesia’s ability to adapt its housing and inclusion policies.
Geopolitical Analysis of Investments in Indonesian Real Estate
Indonesia, the largest economy in Southeast Asia and the fourth most populous country in the world, has undergone a profound economic transformation since the liberalization reforms initiated in the 1980s. These reforms fostered an opening to foreign capital while stimulating domestic investment, particularly in the industrial and real estate sectors. Historically marked by strong state intervention, the Indonesian real estate sector has gradually developed thanks to the mobilization of national savings and the influx of foreign direct investment (FDI). However, the effective realization of approved projects remains hampered by administrative delays and a complex regulatory environment.
Recent Evolution of the Indonesian Real Estate Market
| Year | Total Real Estate Market Size (USD) | Residential Size (USD) |
| 2023 | 61.01 billion | 66.80 billion |
| 2024* | 64.78 billion | 72.11 billion |
| Forecast 2029 | 85.97 billion | 105.73 billion |
- Expected average annual growth (CAGR):
- Overall real estate: 5.82%
- Residential: 7.95%
- Main private players: Agung Podomoro Land, Sinar Mas Land, Ciputra Group.
Indirect Impact of the War in Ukraine on the Asia-Pacific Region
The war in Ukraine has had an indirect but notable impact on Asian geopolitical dynamics:
- Western sanctions against Russia have caused a reconfiguration of global trade flows – particularly energy – from which Indonesia partially benefits due to its ties with various producers.
- Increased instability reinforces the strategic role of certain Asian states as alternative suppliers or logistics hubs.
- The global rise in energy prices increases costs for some sectors but also improves public revenues, notably from coal and gas exported by Indonesia.
Consequences for the Indonesian real estate sector:
- Increased uncertainty leading some international investors to delay their commitments or favor markets deemed more stable.
- Relative strengthening of domestic demand supported by solid internal growth.
Affected Economic and Political Alliances
Indonesia traditionally maintains a “non-aligned” positioning while actively participating in regional multilateral forums (ASEAN). It also develops strategic partnerships:
- Key energy relations
- Middle East: major oil imports
- Australia: liquefied natural gas
Sanctions against Moscow weaken certain global supply chains but also push Jakarta to intensify its cooperation with other partners outside the Russian sphere.
Comparative Role of China/Western Countries in the Sector
China
- Main bilateral trading partner; massive investments in infrastructure/housing via the “Belt and Road Initiative”;
- Recent emphasis on industrial/technological projects related to nickel/lithium essential for electric batteries;
West
- FDI flows remain significant, primarily from Singapore*, Japan*, United States*, Australia;
(*Singapore often remains a regional hub)
List – Potential developments due to the Ukrainian context:
- Increased search by the West for secure alternatives outside Russia → focus on reliable emerging markets like Indonesia.
- Cautious intensification on the Chinese side in the face of growing US/China rivalries; nevertheless, a firm desire to firmly anchor its interests through structural investments.
- For Jakarta: tactical arbitration between major blocs to preserve local attractiveness without alienating any major player.
Short/Medium Term Trends & Forecasts Under Geopolitical Uncertainty
Key points:
- Possible temporary slowdown of incoming FDI flows due to the tense international climate
- Market remains promising nonetheless thanks to its young demographics & rapid urbanization
- Robust domestic demand partially compensates for any potential external slowdown
Key takeaway:
The Indonesian real estate sector continues its growth despite a volatile international environment; it benefits at times from the regional refocusing induced by global tensions and from a proactive strategy aimed at diversification & economic resilience.
Good to know:
Indonesia, with its dynamically growing economy, sees its property market influenced by global geopolitical factors such as the war in Ukraine. A historical ally of energy-producing countries, Indonesia could feel the effects of sanctions imposed on Russia, particularly on its gas imports, which would affect investor confidence. Jakarta’s dependence on China, its main economic partner, proves crucial, especially as Beijing strengthens its influence in the region amid Western tensions. Recent data indicates a slight decline in foreign direct investment, reflecting regional uncertainty; however, residential and commercial properties continue to attract due to the growing middle class. In the short term, international investors might favor a postponement or diversification of their assets, while stabilization could encourage a recovery in investments. The current instability calls for careful analysis, as relations between Indonesia and its partners could evolve, leading to opportunities or challenges in the real estate sector.
Disclaimer: The information provided on this website is for informational purposes only and does not constitute financial, legal, or professional advice. We encourage you to consult qualified experts before making any investment, real estate, or expatriation decisions. Although we strive to maintain up-to-date and accurate information, we do not guarantee the completeness, accuracy, or timeliness of the proposed content. As investment and expatriation involve risks, we disclaim any liability for potential losses or damages arising from the use of this site. Your use of this site confirms your acceptance of these terms and your understanding of the associated risks.
Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
