Indonesia's Central Bank Cuts Rate to 5.5%: How Will This Affect Bali's Real Estate Market?

In May of this year, Bank Indonesia eased monetary policy for the first time in four months, cutting its key interest rate by 25 basis points to 5.5%. This decision, confirmed by Jakarta Globe, was an expected step against the backdrop of a stable macroeconomic environment and a strengthening rupiah. We examine how the changes will affect investments in Bali's real estate and what opportunities they open up for buyers.

Why did the Central Bank decide to cut?

The head of the regulator, Perry Warjiyo, named two key factors:

Inflation control - the indicator is kept within the target range of 2.5% 1%, which is below the US (3.4%) and EU (2.9%) levels.
Stabilization of the rupiah — in April-May 2025, the national currency strengthened by 3% against the dollar (from 17,051 to 16,355 IDR/USD).
This is the second easing since the beginning of the year: in January, the rate was reduced from 6% to 5.75%, after which a pause was maintained for four months.

What does this mean for the Bali real estate market?

1. Cheaper loans for developers

The rate reduction will reduce the cost of borrowed funds for developers. For example, a loan of $5 million will now cost $12,500/year less. This can lead to:

- Acceleration of construction of new projects (especially in the eco-housing segment).

- Reduction in the final cost of properties by 2-5% due to savings on interest.

2. Growing demand for mortgages

Local banks are starting to adjust rates for foreigners. Mortgage programs for non-residents (through PT PMA) are expected to become more accessible:

- Current range — 7-9% per annum.

- Forecast by the end of 2025 — 6.5-8%.

This will increase the influx of buyers from Asia and Europe, for whom loans will be more favorable than in their countries (for example, in Thailand, rates are 8-10%).

3. Strengthening of the rupiah is a plus for dollar investors

The weakening of the dollar against the rupiah makes buying land and construction cheaper for those who invest in USD.

- Before: A plot for $200,000 cost IDR 3.41 billion (at the rate of 17,051).

- Now: The same plot — IDR 3.27 billion (at the rate of 16,355).

Savings: $8,200 when paying in dollars.

Forecast: What will happen next?

Most analysts (Reuters, Bloomberg) predict further policy easing:

By the end of 2025, the rate may fall to 5.25% if inflation remains below 3%.
This will increase the inflow of foreign capital into the real estate sector - according to CBRE estimates, investments will grow by 15-20% by 2026.

However, there are risks:

Increased inflation due to a jump in oil or food prices.
Tightening of regulations for foreigners (for example, new restrictions on the purchase of land through PT PMA).

Tips for investors!

Monitor the rupiah exchange rate - a stronger currency makes deals in IDR profitable.
Consider credit programs - refinance current loans or arrange new ones at reduced rates.
Focus on "long" projects - lower rates accelerate the growth of land prices. Already now in Pererenan and Uluwatu the cost of lots increases by 1.5-2% per month.

As a result, the reduction of the Central Bank rate is a signal to action for those planning to invest in Bali real estate. The "window of opportunity" will last 6-12 months until the regulator changes course. Hurry to fix favorable conditions before the next round of price growth.