Bali high
 If you are a fan of the Island of the Gods now may be the time to consider investing in property.
By Matt McLaughlin
Published in Square Foot Magazine April 15 2007
Jimbaran Bay, Sanur, Kuta, Legian, Seminyak, Uluwatu: the hotspots of Bali have become familiar to sun and surf seekers everywhere over the last several decades, and are now synonymous with luxurious accommodation, jaw-dropping ocean views, world-class cuisine and relaxed tropical livin
There have been dramatic changes in the Bali property market over the last 5-10 years. In the past there was no middle ground between large hotels and stand-alone private residences. The market is now much more geared to managed villa estates, comprising of anywhere from five to 30 villas with private swimming pools, 24-hour security services and management facilities.
The pricing of a villa depends on location, size, proximity to the beach, and whether or not there are ocean views. Two to three bedroom villas in Seminyak and Sanur start at $1.95 million, while prices for villas on the cliffs above Jimbaran bay (with sweeping sea views and perhaps an infinity pool) may start at $5.86 million.
Is it a good investment?
Conservative forecasts predict villa price increases of 10-20 percent per year. There is also an active re-sale market for the five-star villa estates, but not so much promise for the older privately built houses.
Construction quality has improved enormously in the last five years, so the older properties are now less attractive. On the plus side, there is only so much land available in the established Bali hotspots, so this should help sustain increases in property prices. It is difficult to build outside of established areas, as the infrastructure is virtually non-existent.
Villa owners typically buy a villa either for their own exclusive use, or use the villa themselves only a few months of the year, utilising the services of a management company the rest of the year and getting financial returns on short-term rentals. Management companies typically charge 20-30 percent commission, and are responsible for advertising and handling reservations. They also provide routine maintenance, pool/garden upkeep, and housekeeping services.
Buying property
Although it is not possible for foreigners to own freehold residential land in Indonesia there are other options. A foreigner can enter into a legal agreement with an Indonesian nominee who holds title to the freehold (Hak Milik) land. The nominee grants power of attorney to the foreigner, in return for a predetermined fee. In this case the Indonesian nominee will still hold title. Trust is an important component of this kind of lease, as its legal status under Indonesian Law is not clear.
The Indonesian Government introduced Hak Pakai, or right of use, in 1997, and it gives the foreigner the right to obtain and use a parcel of land. A Hak Pakai Certificate is legally binding, granting the foreigner 25 years' initial use, with an extension of up to 20 additional years. If a further extension is not negotiated, upon expiry the land and buildings revert to the Indonesian owner.
Understanding the risks
 Those interested in Bali property are strongly advised to consult with reputable Bali-based property advisors. Due diligence should be conducted prior to entering into a lease agreement to verify the building or land's real status. In some cases the land may not be registered with the government, therefore inquiries with local authorities are necessary to determine who has the exclusive and legal ownership - and who is entitled to transfer a lease right. All legal documents must be properly notarised and lodged with the appropriate authorities.
Despite the 2002 and 2005 bombings, development has not slowed down and investors and holidaymakers are increasingly opting for the villa experience. If security and social issues in Indonesia remain stable there will be a considerable increase in both demand levels and land/villa prices for foreign investors.
The background risk however means that buying volume will always be smaller than somewhere like Koh Samui or Australia's Gold Coast - Bali is somewhere where you buy primarily for love, and this in itself mitigates any negative market sentiment.
RETIRE TO BALI
A relatively new initiative may appeal to those 55 years of age or older. In 2002 the Indonesian Government amended their Retirement Visa requirements, making the process simpler and accessible to a wide group of non-nationals who wish to retire in Bali. Upon meeting certain criteria, a one year Retirement Visa is issued, extendable to five years. After five years of extensions the retiree can apply for an Unlimited Stay Permit Visa (KITAP), and it may be possible to seek Indonesian naturalisation once this visa is processed. For retirement visa information log on to www.expat.or.id/info/retirement.html |
