Bali Villa

Investing and Developing Real Estate in Bali: Your Comprehensive Guide

Investing in real estate in Bali can be a rewarding endeavor, provided you’re armed with the right knowledge about the locale, the real estate laws, and the state of the market. Noted for its idyllic allure as an island vacation spot, Bali has been experiencing a surge in property transactions, escalating property values by an average of 18% in many regions, and even up to 40% in popular tourist destinations such as Canggu. 

Regardless of this sharp rise in property costs, investors continue to be attracted to the island, seeking opportunities to buy and develop properties in Bali. Luxury beachfront villines and generously spaced hillside homes are being snapped up even before construction is finished. The Bali property market is luring serious investors keen to profit from the quickly expanding sector. 

Over the past five years, more than 1,000 luxury villas have been built in Bali for vacation rentals. Numerous investors have staked their claim on the burgeoning Asian holiday rental industry, banking on the consistent growth in property value, which soared by +18% in 2019 alone, according to statistics. This guide aims to address critical aspects, like the size of the market, where to start, and the changes witnessed over the last three years. It is designed to assist you in making an informed decision when investing in your Bali villa. 

With the market valued at a staggering US$162.5m, approximately 35% of the entire Asia Pacific market, the opportunity is considerable. Moreover, there are currently 4,383 villines in Bali available for both full-time and short-term rentals. With 6.3 million foreigners visiting Bali in 2019, the potential for growth is impressive. However, understanding the potential return on investment and what exactly is in demand is essential to grabbing a share of this growing market. 

Prominent Property Locations and Prices 

Top areas such as Seminyak, Ubud, Sanur, and Canggu draw approximately 45% of all tourists, with places like Legian, Kuta, and Lombok also garnering frequent visits. Proximity to a beach remains a significant factor in attracting tourists. The most popular location for villa rentals is along Oberoi Street. 

Three-bedroom villines are particularly in demand among tourists, followed by two-bedroom properties. The average rental price for a three-bedroom villa stands at $350 and for a four-bedroom luxury villa in Canggu, you’re looking at around $580. Lesser-known areas like Lovina, Legion, Sanur, and Gyaniar offer more affordable options, approximately half of the prices in popular regions. 

Demographics of Property Buyers in Bali 

Most of the tourists residing in Bali come from Singapore, Hong Kong, Europe, and Australia, the latter contributing the largest number of visitors in 2019, with 1.23 million Australians visiting Bali. All customers prefer to be near shops, restaurants, and primarily, the beach. European tourists often prefer to stay in traditionally styled villas located in serene, nature-rich surroundings. However, be aware that there’s a significant difference between traditional style and outdated villas. 

In the present day, amenities like Wi-Fi, a tropical garden, a swimming pool, and a private chef are important features to offer to your guests. 

Costs Involved in Buying Property in Bali 

The cost of property in Bali varies significantly based on location and quality. Beachside properties may demand prices similar to those in Western countries, while bargains are becoming increasingly hard to find. Expect to pay around $500K for a freehold 3-bedroom villa on a 300m² plot in Canggu or Seminyak. Leasehold prices would range between $300K and $400K. Moving away from tourist hotspots to places like Jimbaran or Nusa Dua can dramatically reduce these prices. 

Land Cost and Other Expenses 

Before you plan your villa business, consider these cost factors. Note that the following numbers are only part of the cost, as you will also need to account for the agent’s commission and the notary’s fees and taxes amounting to 1% of the investment. 

The lease cost for land starts at around $40,000 for 25 years, as foreigners are legally barred from owning land outright in Indonesia. In popular tourist areas, the average yearly lease rate for 1 are (approximately 100 m²) is $300 in Kerobokan and $1000 in Seminyak. 

If you consider a 400 sqm plot in a sought-after area like Canggu, which costs about $600/are/year, the price for a 25-year lease would amount to 256004 = $60,000. Note that finding a fairly priced piece of land requires patience, as many properties are overpriced. 

The construction of a luxury villa without finishing and decoration usually costs between $300-$800 per square meter. Add another 50% to this to get a more accurate final price.

A full-time staff worker’s monthly salary is approximately $150. If you want to ensure an exceptional experience for your guests, hiring staff is recommended. The average monthly cost for utilities (electricity & water) for a standard two-bedroom villa is about $150. Also, remember to consider the marketing platform market rate of 20%. 

Return on Investment (ROI) and Future Prospects 

Your yearly ROI can range from 10% to 30%, depending on the location of your villa and your marketing efforts. Regions like Seminyak and Canggu offer ROIs of approximately 20%, while Ubud can provide 15%. A unique and well-executed project could even see a 30% ROI. –

Bali’s villa market is growing, with each new investor pushing land prices higher. Prime locations like Canggu are becoming saturated, and prices are surging, especially for plots close to the main road. With over 35,000 listings on Airbnb, modern villa owners must find unique ways to stand out. 

Legal Considerations and Financing 

It’s crucial to familiarize yourself with the legalities before you venture into buying property in Bali. Foreigners are only legally permitted to lease a piece of land in Indonesia, typically for 25 years. After this period, the land and any developments on it return to the original owner. –

Avoid using a “nominee” to purchase the land, as any issues could result in losing your investment. If you’re planning to build a villa on a leased plot, you must obtain a government-issued certificate from the Department of Town Planning and Settlements (Dinas Tata Ruang Kota dan Permukiman). It typically takes between 4-10 months to secure this permit. 

Obtaining a loan for a property in Bali from Indonesian banks is rare for foreigners as the properties usually aren’t registered in their names. However, determined individuals can seek loans by setting up a PMA company or through a nominee. Alternatively, you can explore international bank loans. 

Conclusion 

Despite varying market conditions, there will always be demand for property in Bali. Its unique and spiritual aura continues to captivate, and entering the property market in Bali now may be better than missing the opportunity altogether. As always, due diligence is paramount to ensure a safe and profitable venture in this paradise island.

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