Bali’s new wave
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Long one of Asia’s top tourism destinations, Bali has in the last decade also become one of the region’s top two destinations for investing in resort property. Although still someway behind Phuket in volume of sales and the number of developments, the Indonesian island is catching up fast, helped along by a newly proactive government, both at local and national level, which is keen to develop the island’s appeal as a real estate investment destination for foreign buyers.
Bali is set to capitalise on Thailand’s current troubles, which post-coup have muddied the waters on foreign ownership of property and have slowed investment across the real estate sector.
“Indonesia has a legal environment which makes it quite easy for foreigners to buy,” says Dominique Gallmann, Director of Exotiq Real Estate. “They have a government which has consistently worked on improving the investment climate here and has improved the laws which enable foreigners to buy here. Just recently a new investment law was passed, by which foreigners can now hold government titles on property for 70 years with a possibility to extend.”
Unlike a leasehold, this ‘right of use’ law is a way to effectively control the freehold of land. Leaseholds in Indonesia are arranged solely between the buyer and the seller and, with no government record kept, can be difficult to legally enforce.
Non-Indonesians cannot hold freehold in their own name and although nominee agreements are still widespread, most agents believe that Hak Pakai (Right of Use) certificates are the safest way forward for foreign investors. Linked together with a Hak Milik (freehold certificate) as ‘Hak Pakai atas Tanah Hak Milik’ (Right of Use over Freehold Land), the Hak Pakai leaves the foreign investor in effective control of their land. Importantly, the certificate can also be transferred at any time and renewed in advance.
“We’ve got a new Indonesian government that realises it has to catch up with the rest of Asia,” says Matthew Georgeson, Sales Manager at Elite Havens. “The next step is for the Bank of Indonesia to accept that the extended tenures are a medium which banks can lend on. We’re starting to get finance packages out of Jakarta now. The first step is for expatriates with a working visa and hopefully, if that goes well, they’ll roll it out to the general public in due course.”
Indonesia does not currently have a specific condominium law, which has restricted development on Bali to mostly villas. Although developments are becoming increasingly common, many buyers still opt to buy a plot of land and build an individual villa on it.
“The typical foreign investor is going to buy 20-25 are (are = 100 sqm) and build their own villa,” Gallmann says. Land prices vary considerably depending on location but start at less than US$5,000 per are for plots in the interior, to 10 times that for seaview plots in the developed south of the island.
“In northern Bali you would get decent beachfront for US$2000 an are, so US$100,000 would buy you a beautiful beachfront property. In the south, there’s nothing for that price. You’re looking at US$500,000 upwards. A four-bedroom villa, 400-450sqm, would cost around US$500psm to build.”
South is central
Up until now, development on the island has been largely restricted to the south, close to the airport and the capital Denpasar. The cultural capital Ubud, with its small community of artistically inclined expats, is the only major exception to this trend.
Seminyak, close to the tourist hub of Kuta, has long been the most active area, although once-fashionable Sanur, which has had resorts since the 1930s, has recently made a comeback after years of slow decline. However, the most dramatic increase in development in the past few years has been on the Bukit. This almost circular peninsula, which sits on Bali’s southernmost tip, has seen huge growth driven by the arrival of numerous international brands (see graphic).
“It’s the hot spot. There’s just no land available there,” Georgeson says. “I’ve got five international groups looking for land down there and we just can’t get it. There will be individual houses coming on stream in the next few years, but trying to go in there and buy 2,000-3,000sqm on the cliff is next to impossible.”
Bali’s own property ‘golden mile’, Jimbaran Bay, is located at the northwest of the Bukit. A secluded stretch of beach long popular with five-star chains such as The Four Seasons and the Ritz-Carlton, Jimbaran Bay also benefits from its close proximity to the island’s airport.
One of the most successful recent estate developments, Liv Bali, by Bali Prestigious Properties HK, is located at its northern end and points to the future of high-end development on the island. In an initiative led by the local government and supported by Jimbaran’s neighbourhood associations, a plan for the future sustainable development of the bay has been implemented. The redevelopment plan has led to the removal of over 50 badly constructed restaurants that had encroached on the beach, and a clean-up of the whole area.
Future development has been strictly limited and Bali Prestigious Properties HK has worked closely with the authorities to ensure that the estate fulfils Jimbaran’s new low-density, sustainable development ethos. Just 28 villas, a spa, a restaurant and beach club are being built on 16,300sqm of land. At the time of going to press, 17 of 28 villas had been sold, with the remainder on the market for between US$290,000-$730,000.
Further west in Seminyak, Hanno Soth, CEO of C151 Resorts and Hanno Bali, has been active on the island for over 10 years and has seen brisk business for his ultra-high end beach club developments in the past year.
“The concept of C151 is providing ultra-modern comforts of a hi-tech vacation home in the exotic environment of Bali,” he says. “C151 developments push the envelope of luxury and typically impress its visitors and guests. We’ve sold and built 90% of C151 Seminyak project Phase One and will launch Phase Two in the next few months. The villas are already operational. Our Dreamland cliff-front property is 60% complete, with only two units remaining.”
Northern potential
Given the scarcity of beachfront and seaview land, developers could soon start to move further north in greater numbers. This will also put a premium on southern land and property, which should keep prices rising steadily. Keenly aware of the north/south imbalance, the government has mooted moving the airport further north to encourage development.
Much like Phuket, the majority of buyers in Bali are expatriates based in Asia, mainly in Hong Kong and Singapore. Elite Havens has recently noted a large proportion of French investors and an increase in the amount of Russian buyers.
Proportionally though, Australians, whether based in their home country or expatriates, represent the company’s single biggest buyer group. Tourist arrivals from Australia, long representing Bali’s largest market for foreign visitors due to its close proximity, have been down since a spate of negative press generated in the country about the two bombings and the Chappelle Corby and Bali Nine drug cases. However, this has not necessarily had a negative effect on the real estate market.
“In terms of tourism, the lower and mid-level Australian markets are still not coming, but the wealthy Australians never stopped after the bombs and in fact saw it as a good time to invest,” Georgeson says. “They make up about 30% of our clientele base, although some of them are expatriates.”
Soth similarly saw no drop off. “Ironically we saw a surge in our sales immediately after the terror attack, then a lull for about three months as investors took a wait-and-see attitude,” he says. “Tourist numbers and investment dollars are now pushing towards new highs and the market is more active than ever.”
In fact, rather than dramatic, headline-grabbing news, the main problem Bali faces if it wants to truly compete with Phuket and start attracting more permanent foreign residents and retirees is a lack of decent healthcare facilities. For expat residents and wealthy locals alike, Singapore is the nearest destination for those seeking Western standards of healthcare.
“However, with comparable quality villas being 30-40% cheaper than in Thailand, many investors are happy to live with this inconvenience for now,” Soth says. “Developers and agents alike see the main challenge ahead is helping ensure that Bali keeps pace with the development boom and maintains and improves its infrastructure.
“Our main challenge is that doing things the ‘right’ way in Bali requires time. The business culture in Bali has developed over the decades into a complex system deeply routed in bureaucracy. For most developers in a hurry it can be very frustrating. Fortunately, after a decade in the business, we’ve learned to navigate the system with relative ease. The future of Bali real estate is very bright. The government has set a target for Bali to become the number one tourist destination in the world by the year 2011. I really believe this is achievable since Bali is such a unique destination.”
Thaliand Property Report Online - Bangkok,Thailand By Terry Blackburn
Add comment June 22nd, 2007