Jakarta ranks first on the most preferred destinations list for real estate investment, according to the "Emerging Trends in Real Estate: Asia Pacific 2013" survey report, published jointly by Washington-based Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC).
It shot up to the number one position from 11th place and overthrew Singapore, which topped the list last year.
The report shows that Jakarta leads both city investment prospects and city development prospects lists with scores reaching 6.01 and 6.10, respectively, outperforming Shanghai, Singapore, Sydney and Kuala Lumpur.
For the report, ULI, a nonprofit research institute, and PwC interviewed and surveyed over 400 individuals, which represented various industry experts, including investors, fund managers, developers, property companies, lenders, brokers, advisers and consultants.
The report found that demand for property in Jakarta was strong, supported by Indonesia's stable interest rates and inflation, steady gross domestic product (GDP) growth and increasing foreign direct investment (FDI).
"FDI grew by 39 per cent in the first half of 2012, while year-to-year office rent leaped by 29 per cent," the report says.
The report quoted one executive who said that "getting things done" in Indonesia was relatively easy compared to other markets such as Vietnam.
Another executive, who worked for a large developer, said that Indonesia was going through a "boom period" and everyone was looking at it "very aggressively".
In the retail market sector, Jakarta topped the list, driven by its growing consumer spending power, followed by Shanghai, China's secondary markets, Ho Chi Minh City and Manila.
However, the report warns that Jakarta's retail market will prove tough for average investors to tap.
About 53.5 per cent of the respondents recommended buying retail properties in Jakarta, followed by 39.4 per cent who recommended holding buying or selling the properties and 7.1 per cent who recommended selling them.
Once again, Jakarta took the top spot in office and residential sectors.
In the office sector, 52.3 per cent of the respondents suggested buying properties in the city, while as many as 37.6 per cent of them recommended holding and 10.1 per cent recommended selling.
Tokyo and China's secondary markets placed second and third in the office sector list, respectively.
However, despite Jakarta's achievements in the survey, the city being named top pick still came "unexpectedly", according to the report.
"Jakarta lacks the enterprise, scale and infrastructure of its more developed peers, and perhaps, most importantly, lacks the capacity to absorb large amounts of real estate investment," the report says, adding that Jakarta attracted a modest US$660.5 million (S$807.3 million) in commercial real estate investment in 2011.
Besides infrastructure problems, ULI and PwC also warned investors about potential financial difficulties in running their operations in Indonesia as bank loans were expensive and hard to find.
Jones Lang LaSalle Indonesia head of research Anton Sitorus said he predicted that Jakarta would top the list again in the next few years, citing the city's steady economic growth and higher market transparency.
"The region's economy has not improved as much as Jakarta's. Meanwhile, investors will always look for markets with prominent growth and Jakarta is one of them, regardless of its congestion-, infrastructure- and regulation-related issues," he said.