PROP­ERTY: BALI BECK­ONS

Jakarta’s ini­tia­tive to re­lax for­eign in­vest­ment re­stric­tions is driv­ing new in­ter­est in the Bali prop­erty mar­ket

The Peak (Hong Kong) - - Contents - STORY ANDREZJ BARSKI

For gen­er­a­tions, Bali has evoked images of a sunkissed trop­i­cal is­land par­adise, with golden beaches fringed with gen­tly sway­ing palm trees, lapped by the warm turquoise wa­ters of the In­dian Ocean.

Bali is the jewel in the crown of In­done­sia's boom­ing tourism in­dus­try, an in­dus­try the govern­ment is de­ter­mined to make the coun­try's top for­eign ex­change earner by the end of 2019. Tourism feeds the real es­tate in­dus­try in Bali. A re­port by Global Prop­erty Guide, re­leased in Fe­bru­ary, es­ti­mates that 80 per cent of Bali's econ­omy de­pends on tourism, and that there are about 30,000 ex­pa­tri­ates liv­ing in Bali. These, cou­pled with ris­ing in­vest­ments by both In­done­sians and for­eign­ers in Bali re­sulted in “un­prece­dented prop­erty price in­creases in re­cent years”.

Aus­tralia-based think-tank Fu­ture Di­rec­tions In­ter­na­tional es­ti­mates that In­done­sia's di­rect and in­di­rect for­eign ex­change earn­ings from tourism amounted to US$72.4 bil­lion or about 6.2 per cent of the coun­try's to­tal econ­omy in 2016. The World Travel & Tourism Coun­cil es­ti­mates that by 2027, the In­done­sian travel and tourism in­dus­try will amount to US$141.3 bil­lion.

Terje Nilsen, a part­ner with Seven Stones In­done­sia, a real es­tate agency spe­cial­is­ing in Bali, has seen con­sid­er­able change in the mar­ket. "Some strate­gic ar­eas, es­pe­cially those on the edges of where tourism de­vel­op­ment was in those days, ar­eas like Seminyak for ex­am­ple, saw prices go through the roof! As much as 10 times in a very short space of time,” Nilsen says.

Global Prop­erty Guide notes that six years ago, a four-bed­room villa built on free­hold land in Ber­awa, near the main city of Denpasar, was priced be­tween US$600,000 and US$700,000. Now, the same villa could be worth more than US$1.5 mil­lion. In 2017, vil­las in Bali were priced as high as US$2,300 per square me­tre.

Ac­cord­ing to the 2017 mar­ket re­port by tourism con­sul­tancy Hor­warth HTL, the sup­ply of vil­las on the is­land grew seven per cent year on year. Ask­ing prices mean­while, had a year-on-year growth av­er­age of 36 per cent, de­spite a 69 per cent de­crease in monthly ab­sorp­tion rate.

For in­vestors, the syn­ergy be­tween tourism and prop­erty is good news be­cause in­fra­struc­ture and ser­vices im­prove with in­creases in tourism. And there are more rea­sons to be op­ti­mistic about the re­silience of Bali's tourism draw, de­spite set­backs.

The erup­tion of Mt. Agung last year damp­ened tourist ar­rivals in the last three months of 2017, which many saw as be­ing di­rectly re­spon­si­ble for the drop in prop­erty trans­ac­tions dur­ing the same pe­riod. Yet, the an­nual to­tal num­ber of vis­i­tors to the is­land rose 15.62 per cent to 5.7 mil­lion, ex­ceed­ing the of­fi­cial

tar­get of 5.21 mil­lion, data from Bali govern­ment's show.

In Fe­bru­ary 2018, tourist ar­rivals to In­done­sia were up 17 per cent from Fe­bru­ary 2017.

The Imf-world Bank An­nual Meet­ing will be held in Bali in Oc­to­ber, and to pre­pare for the event, state air­port op­er­a­tor Angkasa Pura is to be­gin con­struc­tion on the ex­pan­sion of Bali's I Gusti Ngu­rah Rai In­ter­na­tional Air­port. The high­level meet­ing will bring 17,000 del­e­gates from 189 coun­tries,

“LESS DENSELY DE­VEL­OPED AR­EAS IN THE NORTH­WEST AND NORTH­EAST SHOW SOME OF THE MOST EX­CIT­ING IN­VEST­MENT OP­POR­TU­NI­TIES THESE DAYS.”

- Dominique Gall­man, Ex­o­tiq Prop­erty

in­clud­ing heads of state, cen­tral bank gover­nors and min­is­ters, among oth­ers.

Bali's In­vest­ment Board is tar­get­ing in­vest­ments worth at least US$1.3 bil­lion for this year. The govern­ment wants to part­ner with pri­vate firms to build a US$2 bil­lion air­port in the ru­ral north of Bali to al­low an ad­di­tional ca­pac­ity of 32 mil­lion pas­sen­gers. Lo­cal me­dia re­port that a large air­port in the north has been dis­cussed for years, but with back­ing from In­done­sian Pres­i­dent Joko Wi­dodo, progress might ac­tu­ally be made.

The In­ter­na­tional Air Trans­port As­so­ci­a­tion, in its 20year air pas­sen­ger fore­cast, says In­done­sia will be the fourth fastest grow­ing avi­a­tion mar­ket. By 2036, the ar­chi­pel­ago's air traf­fic is seen to rise to 355 mil­lion pas­sen­gers.

Chi­nese in­vestors have also shown in­ter­est in Bali. In April, Jakarta and Bei­jing signed five con­tracts worth US$23.3 bil­lion as part of China's Belt and Road Ini­tia­tive, ac­cord­ing to the Jakarta Post. The projects in­clude a US$1.6bil­lion joint ven­ture to build a power plant in Bali.

Co­or­di­nat­ing Mar­itime Af­fairs Min­is­ter Luhut Pand­jai­tan has an­nounced that Jakarta would seek fur­ther co­op­er­a­tion with Bei­jing on some of In­done­sia's eco­nomic cor­ri­dors, in­clud­ing Bali.

There are of course ob­sta­cles fac­ing In­done­sia's tourism in­dus­try such as poor in­fra­struc­ture and the lack of in­vest­ment re­quired to fund the nec­es­sary in­fra­struc­ture projects. From 2015 to 2019, it is es­ti­mated that as much as US$520 bil­lion is re­quired to meet In­done­sia's over­all in­fra­struc­ture needs.

Tourism is also a dou­ble-edged sword. More vis­i­tors mean a more vi­brant econ­omy, and re­turns on in­vest­ments grow as a re­sult. But more peo­ple can also have a neg­a­tive im­pact on the en­vi­ron­ment and lo­cal com­mu­ni­ties: the very things that drew peo­ple to the is­land in the first place.

There's no ques­tion Bali is a buy­ers' mar­ket, but these days, “un­re­al­is­tic price ex­pec­ta­tions mean prop­er­ties are clos­ing at around 80 per cent to 85 per cent of orig­i­nal ask­ing prices,” says Andy Gray of Seven Stones.

This re­sis­tance, from for­eign and do­mes­tic in­vestors un­will­ing to pay high ask­ing prices, has cooled prices some­what, cre­at­ing a more at­trac­tive prop­erty mar­ket in the last cou­ple of years, par­tic­u­larly in ar­eas close to high tourism po­ten­tial.

In 2018, this means more de­vel­op­ment on Bali's west coast, where there are sun­set ocean views and world-class surf breaks with mil­lion-dol­lar panora­mas. Most re­cently, there has been a lot more in­ter­est on Bali's north coast, where the is­land's new air­port is sched­uled for con­struc­tion.

And over the past six months there's been a lot of in­ter­est in free­hold lux­ury vil­las.

“With economies and stock mar­kets in gen­eral ex­pe­ri­enc­ing ex­po­nen­tial growth on a global scale, the lux­ury high-end mar­ket seems to have opened once again, but this is limited to those prop­er­ties with free­hold ti­tles,” says Joe White, Sales Di­rec­tor at Seven Stones In­done­sia.

Matthew Ge­orge­son of Elite Havens/knight Frank says that lo­cals who have ac­quired a free­hold prop­erty will then of­fer it on a lease­hold ba­sis to for­eign in­vestors.

“There is al­ways a mar­ket, even when Mt. Agung erupted, and tourist num­bers de­clined. Now it's all back to nor­mal,” Ge­orge­son says.

In­done­sia's le­gal sit­u­a­tion is also get­ting bet­ter for for­eign in­vestors. While only In­done­sian na­tion­als can own Hak Mi­lik (free­hold) ti­tles in their name, the cen­tral govern­ment has sim­pli­fied the process for for­eign­ers to ac­quire prop­er­ties for up to 80 years un­der a Right of Use ( Hak Pakai) ti­tle in their own name,

or even a Hak Guna Ban­gu­nan struc­ture in the name of a for­eign in­vest­ment com­pany they cre­ate.

But it's not just for­eign­ers from Sin­ga­pore, Hong Kong, Ja­pan and the Amer­i­cas who are in the lux­ury space. In­done­sians too, es­pe­cially those out of Jakarta, are see­ing fan­tas­tic op­por­tu­ni­ties in Bali, some­thing that Siti Purba, prin­ci­pal of Har­courts Purba in Jim­baran, knows only too well. “More than 90 per cent of my clients in the lux­ury villa mar­ket are wealthy In­done­sians, pri­mar­ily from Jakarta,” she says. “And ev­ery year there seems to be more.”

For most Bali real es­tate agents, do­mes­tic in­vestors make up about 60 per cent of clients. “My In­done­sian clients are look­ing for some­thing unique with

“WITH ECONOMIES AND STOCK MAR­KETS IN GEN­ERAL EX­PE­RI­ENC­ING EX­PO­NEN­TIAL GROWTH ON A GLOBAL SCALE, THE LUX­URY HIGH­END MAR­KET SEEMS TO HAVE OPENED ONCE AGAIN, BUT THIS IS LIMITED TO THOSE PROP­ER­TIES WITH FREE­HOLD TI­TLES.”

– Joe White, Seven Stones In­done­sia

amaz­ing views. They tend to have much more re­al­is­tic ex­pec­ta­tions than many for­eign in­vestors,” Purba says.

In Bali, villa prices start at around US$1 mil­lion (some­times a lit­tle less) and they go up from there. US$1 mil­lion will buy a very nice fam­ily home in Sa­nur, along Denpasar's east­ern shore. US$2.5 mil­lion doesn't get beach­front in Seminyak (the re­gion home to the famed Ku De Ta bar), but will get a good cen­tral lo­ca­tion in this tourist hot spot. And it can also get you a nice lit­tle bou­tique re­sort on the north coast. Be­tween US$4 mil­lion and US$5 mil­lion is what you'll need for clifftop in the Bukit or beach­front in Ta­banan, while beach­front in Canggu can reach as high as US$12 mil­lion.

Ab­so­lute beach­front in Sa­nur, for ex­am­ple is not where you'd ex­pect to be spend­ing US$13 mil­lion, but that's the price of a re­cent lux­ury sale there in the fa­mous Batu Jim­bar es­tate on Sa­nur's beach. “This was a great ex­am­ple of a very wealthy In­done­sian client buy­ing for lo­ca­tion more than any­thing else. The villa could have been bet­ter but that much space on that par­tic­u­lar beach was a rare find,” says Purba.

Beach­front, clifftop and surf­break views are at the top of most peo­ple's check­lists but there are also rugged moun­tains, seas of un­du­lat­ing rice fields and trop­i­cal jun­gle vis­tas to be had. Lux­ury op­tions in Ubud for ex­am­ple will be in the US$3 mil­lion to US$4 mil­lion range.

Julien Hug, how­ever, mar­ket­ing spe­cial­ist at Ex­o­tiq Prop­erty in Seminyak, be­lieves the fu­ture lies on the west coast. “Once Canggu be­comes sat­u­rated there is likely to be move­ment to­wards Cemagi fur­ther north.”

This may well be the case for those de­ter­mined to in­vest in Bali's most pop­u­lar des­ti­na­tions and their fringes, but Dominique Gall­mann, CEO of Ex­o­tiq Prop­erty, pre­dicts the “less densely de­vel­oped ar­eas in the north­west and north­east show some of the most ex­cit­ing in­vest­ment op­por­tu­ni­ties these days.”

Ge­orge­son also sees the north­ern and east­ern ar­eas of Bali as the most promis­ing lo­ca­tions for prop­erty in­vest­ments.

“It's mov­ing fur­ther north and east, but not that far from the present strate­gic ar­eas,” he says.

Re­gard­less of lo­ca­tion, it's ac­cess

that ap­pears to be the num­ber one con­sid­er­a­tion. If roads don't make the grade and it takes too long to get to your oa­sis then he­li­pads and boat ac­cess be­come es­sen­tial.

Most peo­ple look­ing to in­vest in lux­ury prop­erty in Bali have a life­style to main­tain with the best op­tions be­ing self-con­tained with lots of space and some­where mag­i­cally beau­ti­ful. White ar­gues the ex­pe­ri­ence for these buy­ers is the great­est con­sid­er­a­tion. “From our per­spec­tive the clients we help are not usu­ally too wor­ried about get­ting healthy re­turns from rent­ing out their prop­er­ties when they're not us­ing them, but they do want to feel they're get­ting value for their in­vest­ment. They're mostly look­ing for that un­be­liev­able ex­pe­ri­ence ev­ery time they stay there,” he says.

THIS SPREAD Villa Mana, lo­cated in Canggu, of­fers rice-field and moun­tain views.

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