Wealthy Indonesians lift Bali property

PUBLISHED : Wednesday, 16 September, 2009, 12:00am
UPDATED : Wednesday, 16 September, 2009, 12:00am

Balinese real estate seems to have weathered the recent financial storm relatively well. House prices have not changed much compared to last year, estate agents say, although there have been fewer transactions.

'There are fewer buyers, but the sellers are not in a rush, meaning there have been fewer transactions but they have been at stable prices,' said Mathias Echene, who heads Pantai Lima Estate. 'Whenever the local currency is under pressure, as was the case last November, wealthy Indonesians tend to buy property to get rid of their rupiahs, and most of the time, they buy in Bali. This is a fantastic stabilising tool.'

Estate agents said prices and the number of transactions could go up this year. 'The market has picked up over the past two months,' Echene said. 'Prices are 5 per cent higher than they were in late June. We are seeing some big transactions. A four hectare piece of beachfront land, not too far from Seminyak, just sold for US$10 million.'

Yang Jingcho, administration and sales manager at Villas and Land, agreed. 'There are a lot of buyers in the US$100,000 range for villas, land and apartments,' he said. 'Villa leases have increased by about 50 per cent over the past couple of months. Sales in the US$100,000 to US$200,000 range have increased between 20 and 25 per cent.'

People invest for various reasons. The island offers a superb lifestyle. Prices are reasonable. A return on investment of between 5 and 10 per cent per annum is usually possible if you factor in capital appreciation. Transactions for non-residents usually have to be in cash as mortgages are not generally available.

'There are no local finance options available for non-Indonesians,' said Matthew Georgeson, general manager of Elite Havens. But that doesn't seem to be dampening demand. 'Sales activity and enquiry levels have increased by 100 per cent over the past two months.'

For those on a limited budget, condotels - condominiums that are managed like hotels - are the most affordable option. 'A 50 to 100 square metre unit in a good location in town or near the beach would cost from US$50,000 to US$100,000,' Yang said.

Those with deeper pockets generally opt for villas. Prices vary considerably. 'A 300- to 500-square-metre leasehold villa in Seminyak with two to four bedrooms and a 30- to 50-year lease would cost between US$200,000 and US$500,000,' Yang said. 'Standard two- to four-bedroom freehold villas in Canggu, Bukit or Jimbaran with good rice paddy or ocean views would cost from US$350,000 to US$750,000.'

Those more interested in lifestyle are heading to remote locations offering space and privacy. A freehold beachfront villa with four to six bedrooms measuring more than 1,000 square metres in Canggu, to the north of Seminyak, or the Bukit peninsula at the island's southern tip, could easily cost US$1,500,000.

Seminyak - with its trendy boutiques, supermarkets selling imported foodstuffs, gourmet restaurants and nightlife - offers the strongest return on investment as demand for accommodation is strong all year long.

'Seminyak is the most sought-after location in Bali due to the high-end restaurants, great shopping and easy walking distance to the impressive beach,' says Karl Wilkins, sales manager at Paradise Property Bali. 'Eighty-five per cent of our villa rental inquiries are about Seminyak, and most worldwide investors choose it.'

One of the attractions of Canggu is the ample supply of land on the beach. Another is the relative privacy. A third is the availability of freehold titles. 'This region offers more readily available freehold land than the leasehold land that is usually on offer in Seminyak,' said Patrick Clancy, marketing and sales consultant at Exotiq Real Estate. 'There are still some large plots of beachfront land available for the buyer with very deep pockets whereas in Seminyak the beachfront land is gone.'

Another area starting to attract overseas investors is the island's southern tip. 'We like the fact that the Bukit has the island's best beaches - white sand - and developing properties there doesn't impact the island's picturesque paddy fields, which are rapidly disappearing under the weight of villas,' said Vic Faulkner, managing director of the Karma Group.

'The Bukit is comparatively dry and not suitable for rice farming.' From an investment standpoint, this area is a dark horse. Will it be the next Seminyak? 'It's the area seeing the most dramatic increases in land values - well over 25 per cent per year,' Faulkner said. 'Along the southern cliff line, there are major new hotels such as the St Regis, the Bulgari and the Banyan Tree, attracting high-spending tourists. It's a matter of time before the infrastructure there rivals that of Seminyak.'

Investors in Bali should seek independent legal advice from a law firm with local and Western lawyers before purchasing or leasing land.

'Someone has to do due diligence,' Dominique Gallmann, chief executive of Exotiq Real Estate, advised. 'Not to do so would be foolish. We always want our clients to hire a lawyer.

'Currency fluctuations can have an impact not only on the price of real estate, but also on demand. International buyers tend to think in terms of dollars, whereas Indonesian buyers think in terms of rupiahs, which declined significantly against the dollar last year, but have since been making a comeback.'