"Analysis of Property Bubbles in Major Indonesian Cities (2010–2025): A Two-Stage Least Squares (2SLS) Approach".docx

Title: Analysis of Property Bubbles in Major Indonesian Cities (2010–2025): A Two-Stage Least Squares (2SLS) Approach Author: Miko Fransisko Abstract: This study investigates the existence and dynamics of property price bubbles in major Indonesian cities from 2010 to 2025 using a Two-Stage Least Squares (2SLS) regression approach. The research aims to identify the macroeconomic and financial factors influencing rapid housing price growth, including interest rates, GDP per capita, credit expansion, and urban population growth. The 2SLS model is employed to address endogeneity between property prices and credit variables, ensuring unbiased parameter estimation. Results indicate significant evidence of speculative bubbles during periods of low interest rates and high credit growth, particularly in Jakarta, Surabaya, and Medan. The findings highlight the critical role of monetary policy and banking regulation in mitigating systemic risks within Indonesia’s real estate sector. This study contributes to the empirical understanding of asset price bubbles in emerging markets and provides policy recommendations for sustainable housing market development. Keywords: property bubbles, Indonesia, real estate market, 2SLS regression, financial stability, speculative dynamics, monetary policy.