THE EFFECT OF LOAN-TO-VALUE POLICY AND MACROECONOMIC VARIABLES ON INDONESIAN PROPERTY CREDIT
Abstract
Since its first implementation in 2013, Indonesia's Loan-to-Value (LTV) policy has undergone several changes. The implementation of LTV policies in several countries has been quite effective in preventing the occurrence of property bubbles by restraining lending rates in the property sector and preventing nonperforming loans (NPL). On the other hand, the property sector significantly contributes to the economy because it has many links with other economic sectors and employs many workers. This research aims to identify the effect of property prices, loan interest rates, economic growth, NPL, and LTV on property credit in Indonesia. Using an Error Correction Model, this research finds that, in the short run, only economic growth has positive and significant impact on property credit. Meanwhile, in the long run, property credit is influenced by economic growth, credit interest rates, and property prices. The LTV policy does not significantly affect property credit in the short or long run. This implies that other policies, such as VAT exemption and macroprudential incentives, should support LTV. Another finding of this research is that the COVID-19 pandemic does not significantly affect property credit because developers offer some discounts when purchasing power is lower.
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DOI: https://doi.org/10.33373/icms.v1i1.9
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