Arguably one of the world’s most famous islands, Bali has seen its vital tourism industry boom, dwindle, and thankfully recover in just a span of a decade. The long-time favoured weekend retreat by high-net-worth Singaporeans, according to Savills, its unique cultural landscape, shaped by its major religion, Hinduism, coupled with stunning coasts, lend Bali a unique ambience not seen anywhere in Indonesia.
As an offshoot of the tourism industry, Bali’s property market, particularly the high-end segment, has weathered the economic downturn fairly well. According to Elite Havens’ managing director Matthew Georgeson, this is because financing is not available to foreign buyers, making a big percentage of transactions cash-based and helping stabilise the market in times of recession.
At the same time, Indonesia’s robust economy (GDP grew 6.17% year-on-year to Q3 of 2012) has encouraged locals to invest in real estate, many of whom prefer condos and condotels carrying well-known brands like Novotel (where foreigners are the major purchasers of villas).
The market also benefitted from improvements in the island’s infrastructure, such as the construction of several highways that make far corners of the island more accessible and the expansion of the Ngurah Rai International Airport. Savills’ James Cook described Bali real estate as ‘booming’ and that investors are confident that the island’s market will continue to flourish.
According to Gede Semadi Putra from the property committee of the Indonesian Chamber of Commerce in Bali, land demand for hotels, villas and condotels is booming, and the supply of land is decreasing. As a result, land prices are extremely high, especially in the popular areas of Seminyak, Jimbaran, Kuta and Legian.
Elite Havens’ recent Bali Property Update indicated that the island is considered a safe location for investment amidst the global downturn. The price of land in Bali showed an upward trend during the first semester of 2012, with an average increase of 28% in a number of strategic locations. At 43%, 2011 recorded the highest percentage increase.
‘The price will continue to show an upward trend through the rest of this year, both in coastal and non-coastal areas, and is predicted to record a higher increase compared to previous years,’ said Georgeson.
LOCATION, LOCATION, LOCATION
Real estate’s old adage is generally true in Bali. Locations in the island have a fairly rigid pricing structure because it is a strictly cash-based market. According to Elite Havens, price is driven by desirability: stunning views and proximity to the beach and to shopping and dining spots.
Kuta, an administrative district located at the south of the island, near the airport, was the ‘in’ spot in the 1970s. It rapidly became commercialised; hence, by the end of the decade it had become a small city and a backpackers’ mecca. Heavily built up, it is home to a large collection of budget and mid-range accommodations and a few desirable residences.
The greater Seminyak Area (Legian, Seminyak, Petitenget and Batu Belig) is where expats moved to when Kuta became too noisy. Though the area has seen considerable commercial development in recent years, which led to escalating property prices, it is still the destination of choice of discerning holidaymakers, due to proximity to upscale bars and restaurants and boutiques and specialty shops. As a result, Seminyak remains one of the most desirable places to buy, especially to thoes who intend to rent out the properties when they are not in residence themselves. According to Elite Havens, non-beachfront land in this area is now commanding prices of US$155,440 per Are (Are is a metric unit equivalent to 100 square metres; hence, a hectare has 100 Are).
Further north are the areas of Tanah Lot and Seseh, where interior plots are offered at cheaper prices. According to Elite Havens, these areas are for longer -term investment consideration, though it is predicted to see steady growth as infrastructure is improved. In particular, prices of interior plots in Seseh increased 20% in 2012, while those in Tanah Lot remained stable after surging 33% in 2011.
Bali’s cultural capital Ubud retained is tranquil ambience despite the massive developments around it. It is home to a fairly large expat community more interested to true Balinese culture, not to mention a string of well-heeled visitors in recent, including Hollywood celebrities. The area’s abundant natural attractions – a rain forest, rice terraces, rivers, hills and valleys – have provided a good setting for a large number of high-end boutique resorts and spas, chief of which is a Four Seasons resort in Sayan.
A great area for families, Jimbaran is the curve of coast near the southernmost tip of Bali. Its white sand beach is pretty and safe and it’s close to the airport (though not affected by aircraft noise). Though it has no nightlife to speak of, it’s just a short drive away from Kuta or Seminyak. It is also home to several popular hotels such as the Four Seasons and the award-winning Ayana Resort & Spa.
WHAT TO BUY
Perhaps being overbuilt gives Bali an advantage over other established island property markets in the region. Here buyers have plenty of options, from exciting cliff-side villas to tranquil retreats.
1 Example is a top-end cliff-front villa within an exclusive estate. Located in South Bukit (merely 25 minutes from the airport) on the extreme southern tip of Bali, this five-bedroom villa has stunning views of the Indian Ocean. It is situated within an exclusive estate limited to just seven custom-designed villas with over a hectare of member facilities.
In addition to in-villas services, owners also have access to various amenities within the estate, such as a helipad, two tennis courts, professional putting green, a cliff-top restaurant, a 28-metre swimming pool, a gym, spa and a beach club, the latter can be accessed via a private funicular rail. The villa, which has a total area of 722 square metres, sits on a 2,500-square-metre freehold land, and offers good potential on rental yields and capital appreciation.
2 Also in South Bukit is another six-bedroom, cliff-side villa that sits 90 metres above a white-sand beach. This contemporary-designed property boasts indoor and outdoor bathrooms, four whirlpool baths, a living and dining pavilion, an open-plan kitchen, a home theatre, and a 216-square-metre infinity-edge swimming pool. Built in 2006 and revamped in 2011, this property sits on a 3,033-square-metre freehold land and is located just 25 minutes from the airport.
3 A 30-minute drive from Seminyak is a traditional Balinese village in Cepaka, within which sits a six-bedroom villa whose architectural design presents a series of stand-alone pavilions with thatched roofs, natural-stone walls and floor-to-ceiling folding glass doors. Each of the villa’s six bedrooms has a private elevated terrace that overlooks a river, and three of them have their own, private plunge pool. The property, which was built from 2000 to 2003, sits on a 5,000-square-metre freehold land, approximately 40 minutes from the airport.
4 Only 10 minutes from the exciting KuDeTa is a prime villa that sits on a 700-square-metre freehold land. This property has a large living and dining pavilion, four bedrooms with ensuite bathrooms (and a large children’s suite), a home office, a 10-metre swimming pool, a fully fitted kitchen and private parking. This villa, located in the exciting Seminyak area, offers attractive capital appreciation and rental potential.
A BUYER’S GUIDE
As with any purchase, it is important to understand how Indonesian property laws work. However, as with many other markets in the region, Indonesia’s is very confusing to foreign buyers.
Can foreigners buy property in Indonesia? The answer to this is ‘it depends on the title of the land on which the property sits’, says Anton Sitorus, head of research at Jones Lang LaSalle Indonesia.
According to Sitorus, there are two fundamental rulings for foreign property ownership in Indonesia: the Basic Agrarian Law of 1960 (UU Pokok Agraria Tahun 1960) and Government Decree #41 of 1996.
The Basic Agrarian Law is Indonesia’s main law concerning land ownership and includes a section about ownership by foreign individuals and institutions. It says that a foreigner who resides in Indonesia is allowed to own a residential property built on land with a ‘Hak Pakai’ (right of use) title. Further, Government Decree #41 of 1996 stipulates that the maximum period for ‘Hak Pakai’ ownership is 25 years, which can be extended for another 20 years.
On this basis, a foreigner is legally allowed to buy, for example, a house that is built on a single parcel of land, but they must convert the title of the property to a ‘Hak Pakai’ title to comply with the laws.
Things to Consider
1 Make sure to set your budget and stick with it. A little flexibility won’t hurt, but be realistic and honest with your financial standing.
2 Know the market really well. Try renting a place in Bali to get a feel of the island and build relationships with agents, lawyers, etc., over time. Make sure that your needs are completely understood.
3 What are your reasons for buying a property? Investment? Vacation home? Both? If you plan to stay a couple of weeks a year in the property and rent it out the rest of the time, then a managed resort-type property may be for you.
4 Don’t compromise your requirements. Keep looking until you find the exact property that satisfies your specifications.
5 Make sure that your agents and representatives understand the legal matters and have them explained to you. Never rush into anything without understanding first everything you need to know.