Indonesia’s most aggressive monetary tightening since 2005 is set to slow economic growth but it cannot slowdown the soaring property market in the world’s fourth-most populous nation.

A young population, elevated inflation and property-price gains that outpace interest rates are spurring real-estate sales from Jakarta to Manado, according to a report in the Jakarta Post.

Home prices in the third quarter rose an estimated 14.6% compared to a year earlier, according to a Bank Indonesia survey, while the Indonesian Real Estate Association predicts housing sales will climb more than 50% this year.

“Indonesia has a huge population, that’s a potential market for us,” said Setyo Maharso, chairman of the Indonesian real estate association, which predicts 2013 property sales will rise to 400,000 units from 260,000 last year. “For our buyers, as long as they have the ability to pay monthly instalments, sales will keep increasing till the year end.”

With foreigners restricted from owning property in Southeast Asia’s biggest economy, Indonesia is confronting a surge in local demand rather than the capital inflows that spurred record home prices in neighbouring Singapore and Hong Kong.

After the central bank imposed stricter loan-to-value ratios for mortgages, persistent price gains may prompt the government to raise real-estate taxes also, according to the report.