Property

A Place in the Sun

A Place in the SunResort properties are hugely popular investments throughout Southeast Asia. Branded residences have sprung up in Thailand, Cambodia and Vietnam, and have given rise to the same brands testing the waters in more urban areas like Bangkok and Singapore. But resort properties are still the favourite. Buy a suite or a villa at Four Seasons, Ws, Banyan Trees and enjoy weeks of free nights in luxury on the Andaman Sea and its ilk. For the rest of the time when you’re not there, earn returns on the managed investment when other people are.

For many years, Bali has been another of the region’s most popular destinations. The island province is home to almost four million people, and its renowned cultural diversity, arts and natural beauty have put it front and centre for decades. Where Jakarta is flirting with a Bangkok-style property market rooted in condominiums targeted at professionals, Bali’s single largest industry is tourism. That would position the island as an ideal investment spot except for Indonesia’s strict ownership laws. Nonetheless, five-star hotels and resorts are rife, and the last few years have seen brands like The Residences at W Retreat & Spa Bali-Seminyak dabble in the investment market.

Though Bali has had its share of ups and downs — like the hotel bombings that have kept Australian government travel advisories in place — visitor arrivals are rising. Ironically, Australians still lead the way, with Chinese and Japanese tourists rounding out the top three. The island was thrust into the spotlight briefly in farther flung locations when Elizabeth Gilbert’s inexplicably popular memoir Eat, Pray, Love (and the Julia Roberts film adaptation) hit bestseller lists globally. The international airport at capital Denpasar (Ngurah Rai) is in the midst of massive expansion plans to be able to support the upward spiralling visitor arrivals (currently approximately 11 million per year) coming in from Australia, China, New Zealand, Hong Kong, Taiwan, Malaysia, Singapore and beyond.

All those people means hotel development is booming, and as such land prices are rising — estimated at 20 percent for 2012. In February, Knight Frank’s senior associate director of advisory and investment, Fakky Hidayat, told Indonesia Finance Today that Bali was morphing into a multi-purpose destination, including high profile events, and that was driving the resort, villa and hotel development charge. Combined with extensive road works and other infrastructure to complement the airport’s upgrades, Knight Frank’s research estimated that land prices in areas such as Seminyak (where the W is), Legian, Petitenget and Batu Belig, grew the most: 50 to 87.5 percent last year. Land in Seminyak is sitting at around IDR10 to 15 million per square metre (HK$8,500 to 13,000).

But leasehold property makes for complicated purchasing, and like Thailand, international investors need local partners if they stray from branded residences. But it’s not hopeless. “[International buyers] are buying for long lease land title. It’s hak pakai, or ‘right of use’. That’s not very popular for Indonesians, but there’s also a long lease title. After the expiration date they can return the land or extend the title with the landlord,” explains Hidayat. Nor are strata-title style purchases out of the question. Condotels, as they’re referred to in Indonesia, are being developed in direct proportion to hotels, and they provide investors the kind of passive rental-return based investment so common in Thai resort properties. And make no mistake: there are plenty of stand-alone luxury villas for sale in Bali, the majority of them managed.

“Talking about luxury villas, the most common practise for that is having a Balinese nominee, under a special arrangement. The land can also be purchasing by buying a 50-year lease, and when that expires you have to return the land as well as the premises on top of the land.”

Special arrangements with developers are fine, but does that equate with added risk? Do overseas “owners” have worry about losing their titles and vacation homes on a whim? Not really according to Hidayat. “That’s hard to say. There have been disputes with foreign buyers and landowners … Compared with freehold in other countries, yes, there is some risk, but the market is still there and response is good.”

For investors looking at vacation homes however, Bali makes good sense. “Oh yes. Bali is a combination of culture, the environment and the people. Any number of destinations have beautiful beaches, but not everything has it all. It’s popular with foreign tourists and Indonesians as well. Having said that,” Hidayat notes, “infrastructure is an issue. The airport finished its upgrades in order to keep up with the demand of arriving passengers, but there are roads and water supply issues and so on. But its still a good investment option because Bali continues to attract tourism from around the world.”