ABSTRACT
The Global Financial Crisis of 2008 is a prominent example of how we should be aware of potential property price bubbles. In this paper, we estimate the chances of an Indonesian housing price bubble and build a probability model to seek any possible determinant. Results from these estimations then help in developing a strategy to be used to prevent business failure. As predictors of price bubbles, we used macroeconomic factors and macroprudential policy, as these are easily monitored. Results from this paper suggest that GDP growth could serve as an early warning indicator of price bubbles, implying a counter-cyclical relation with the bubble. In addition, some LTV (Loan-To-Value) implementation is too strict, inducing a bubble instead of stabilizing prices. This information, along with the demonstrated procedure, could help firms plan early reaction to prevent upcoming bubbles.
