Nearly everyone who visits Bali ends up giving careful consideration to buying some Bali real estate and having an investment that will eventually become a retirement pad.
However, making a successful investment when buying property in Bali isn’t always straightforward and here we offer our insight into buying property in Bali.
We note that this is not professional financial advice and you should still conduct due diligence before you set about buying villas as you would in your home country.
It’s simply based on our experiences with real estate here on the island.
What Is The General Outlook For The Balinese Economy?
It’s fair to say that Bali is currently undergoing something of a boom as is Indonesia as a whole.
In fact, figures suggest that Indonesia has the seventh fastest-growing economy on the planet!
Bali has announced several recent major projects that should see continued long-term growth.
These include a new international airport, a Paramount Pictures theme park (which is expected to be the largest in Southeast Asia when it is finished), a Formula 1 race track and a brand-new port for cruise liners to use.
All of these should see continued upward trends in the value of property market in Bali as should many of the smaller projects in every part of the island.
Why Would Investing In Bali Property Be A Good Investment?
It’s important to note that we’re not selling real estate and that you should always get independent financial advice before you make any kind of investment but there are some good reasons to be optimistic about future returns in Bali’s property market.
The Tourism Sector Is Booming
Bali’s tropical climate means that there’s never really a bad time to visit the island and, in turn, this means that the tourism sector has plenty of room for growth.
We’ve seen at our beach clubs that more and more visitors are arriving in Bali.
The island has it all: extraordinary nature, active volcanoes, fabulous wildlife, UNESCO award-winning rice terraces, unspoiled beaches, and a mature tourism infrastructure that sees rapid development when needed.
Property prices are going to keep rising in the Bali real estate market because there will always be tourists coming to the island.
The Bali Property Market Is Stable And Produces Returns
Deep breath time. The following numbers are averages provided by the Bali development industry and can vary substantially depending on what kind of property you buy and where you buy it.
They are for guidance only.
However:
Bali currently offers one of the best rental yields in the world of around 15% on purchase price. Comparatively, the rest of the world only returns about 5%.
Bali also offers roughly 15-20% year-on-year equity increases which is a lot higher than in most other markets.
Renting cost is going up all over Bali. Annual rent increases are roughly 15-20% (though how long this can be sustained is a good question).
Occupancy levels are excellent with the average property occupied for nearly 65-80% of the year.
You can often recoup your entire investment money in 6 years. This means you can expect to purchase additional property quickly and the levels of passive income can be off the scale if you invest for long periods of time. Digital nomads, in particular, often eschew a permanent residence in favour of owning investment properties in places like Bali.
Relatively Low Foreign Investment Thresholds
While, of course, property in a prime location is going to be more expensive than in other areas – property prices in Bali are still much lower than in the West.
A decent apartment can be purchased for around $150,000, a cottage for about $215,000 and a villa (including all furnishings) for around $350,000.
It is worth noting that at some point in the near future, Balinese properties will become more expensive than properties in other Southeast Asian nations.
Bali Property Investment Is Encouraged By The Balinese Government
The Balinese government is fine with people from overseas buying properties or signing a lease agreement to make money.
As long as you have the correct business licenses (and the government makes these relatively easy to acquire and they also make it simple for you to pay taxes) you can start a villa management company today.
However, it’s worth noting that setting up a company to get these licenses requires a fairly substantial ($700,000) investment. Otherwise, you will need to work with your real estate agent or developer to use their license.
What Should Make Foreign Investors Cautious About Investing In Bali?
This doesn’t mean that you should immediately rush out to secure those business licenses. The Balinese property investment market has some potential pitfalls too.
You Cannot Own Land Just Bali Real Estate
In common with many other developing nations – a foreign individual cannot own land in Bali. Foreign individuals can own the property on the land and a lease on the land itself but not the ground.
This is one of the reasons that many choose to invest in apartments rather than other types of property as there is no expectation of owning the land in a leasehold-style apartment building.
No Mortgages For Property Investment
The Balinese economy is not fully developed, yet and while it’s easy to buy Bali villas for investment or as a vacation home, it’s not easy to get any kind of mortgage for investing in property.
Indonesian citizenship is essential for getting a loan and this may well deter foreign investors from investing in property in Bali. The only exception to this rule is if you are married to an Indonesian citizen.
We should note that you may be able to get a loan on the property from your bank at home.
There are some banks with experience in overseas investing, who understand that you won’t be able to secure the loan against the land.
However, typically loans arranged in this manner command higher interest rates than standard mortgages.
In some countries, you may be able to get an equity release loan against your current home – this may work out cheaper than other loans but carries the risk of losing your home if you default on payments.
Pre-Owned Trouble
It’s usually better to buy off-plan in Bali than to buy a pre-owned place. They say “if you buy an existing property here, you buy somebody else’s problems.”
That doesn’t mean off-plan is perfect. Just that it’s easier.
Company Structure For Real Estate Rentals Is Specialized
You need a certain corporate structure, which needs to be set up by a local company specialist, in order to be able to rent real estate (and the land) that you might want to use.
Can’t Build Higher Than Four Floors
If you intend to get involved in construction, then you should be aware that no construction in Bali is going to get permission to be taller than four floors.
This can, obviously, have big implications when it comes to developing apartment blocks, etc.
You Cannot Develop Properties In Certain Areas
You also need to scout the location very carefully before you pour money into a lease.
It is forbidden to build near a temple or across any area which is or might be used for religious pilgrimages.
Those breathtaking views of lush greenery may well be breathtaking because even in the most popular locations, there are limits to where you can build in Bali, Indonesia.
Risk Varies With Property Type
There are also different levels of risk inherent to the type of property that you buy.
Apartments – not only do apartments come at a lower price than villas but they tend to be optimal for hands-off investing. Apartments are in high demand in Bali, right now, and tend to be easy to rent out. However, they are in short supply as getting planning permission for apartments isn’t easy.
Private villas – there are plenty of villas and many of them at affordable and attractive prices. However, they need a lot of work and the climate can cause a beautiful villa to turn ugly overnight if they aren’t kept under a constant maintenance cycle. This means you need to use a property management company if you’re not going to be onsite and that will eat up 30%+ of your annual returns.
Risk Varies With The Area
It won’t come as any huge surprise to learn that location, location, location is a rule in Bali as well as it is anywhere else on Earth.
Lovina may be lovely, but for now, it’s a low-demand spot right on the edge of the tourist radar. You can buy things cheaply there, but demand is low and rental returns and annual equity increases are minimal. You want to look at places where you can expect a better return on your investment and this includes:The Most Attractive Places To Invest According To Local Real Estate Agents
- Canggu – Canggu is currently “on fire” in terms of its property market. Development here is going on at a rapid pace and it’s becoming increasingly popular with tourists, nomads, and expats alike. The downside of this boom is that traffic in Canggu is becoming more congested, which may see an outward flow of people in the future.
- Seminyak – Until recently, Seminyak was the most popular place to invest in Bali and that’s because this upscale neighbourhood has everything that a tourist could need and at a premium price. It]’s a top spot for shopping, dining and entertainment and while Canggu may have stolen the “most popular” crown, for now, Seminyak remains in high demand.
- Uluwatu – Uluwatu is a beautiful part of Bali that has become world-famous for its surfing spots. The natural beauty of the area is drawing in more and more people each year and the demand for villas and accommodation is soaring. If you want a more patient investment than Canggu or Seminyak, Uluwatu should do very well in the next few years.
- Ubud – The central part of Bali is unlikely to ever be quite as popular as the lowland beach destinations but it’s gorgeous and plenty of people appreciate its cooler weather and rainforest and rice paddies. We’d expect Ubud to remain a solid performer for years to come.
- Cemagi (“the new Canggu”?) – this area isn’t very developed but it’s near to Canggu and in true Bali-style when Canggu gets overloaded, Cemagi should benefit. If you don’t have huge amounts of investment capital to get started – Cemagi is much cheaper than the first four areas above.
- Nyanyi – another area that’s close to Canggu and offers plenty of good reasons to invest.
- Bingin – this is more speculative but Bingin is kind of similar to Uluwatu a few years ago. If you want an early-stage investment with the potential for big returns, it’s worth a look.
- Sidemen – people are finally starting to discover this beautiful part of East Bali. Rental property should do very well here in the coming years.
A Big Chunk Of Your Rental Income Will Go To A Property Investment
Management Company
If you need to use a management company to help safeguard your investment, you should be aware that it’s going to cost you 15-30% of your profits.
However, given that the current rate of return is improving by 20% year on year? That’s a reasonable cost of doing business in Bali, for now.
How Do You Buy Property In Bali?
If you want to buy property in Bali, you should first consult with your own financial advisor or accountant.
Then, you want to work with a local professional real estate agency that has experience working with foreign investors.
They will guide you through the process of acquiring property, help you to appoint the right legal advisor and give you advice as needed on the local market and conditions.
A real estate company will also help you find a renter or resell your property at a later date.
There are only two good ways to buy property in Bali. 1.) Use a leasehold agreement or 2.) establish a foreign investment company (PT PMA).
Avoid any other structure as these involve a large amount of risk leveraged on you, the purchaser.
An Attractive Investment Opportunity In Bali
FINNS has recently announced its FINNS Bali Resort and investors are welcome to buy apartments within the resort as investments. There are no promises of unrealistic returns, but there are guarantees that the resort will be completed and that the FINNS brand will ensure a steady stream of rentals.
FAQs
Is It A Good Idea To Invest In Bali In The Real Estate Market?
We don’t give investment advice. What we can say is that many investors in Bali are very happy with the villas, apartments, etc. that they have purchased and now profit from.
Other investors have made different decisions and may not be as happy with their investments.
It is vital that before you buy anything – you take proper financial advice.
And if you do buy, make sure you have the business licenses to support your investment.
Can An Australian Buy A House In Bali?
Yes. But it’s complicated by the fact that you cannot own land in Indonesia.
This means that you can lease the land from either the local land owner or the government and then build on the leased land.
However, there are limits on the conditions of the lease and when the lease expires, the property ownership reverts to the land owner.
The most important of these conditions is that a land lease may run for a set period of 25 years and then it can be extended once more for a further 25 years.
Not a big deal if you’re 70 and trying to buy a house in Bali, but potentially a huge deal if you’re 20.
Can Foreigners Buy Property In Bali?
Yes. But as with the example above, you cannot buy the land it’s on. Many foreign investors prefer to deal in apartments/studios rather than villas for this reason.
Is It Worth Buying Land In Bali?
No. Well, it might be if you’re an Indonesian citizen but if you’re a foreigner – you can’t buy land in Bali, legally.
So, even if someone were to sell you land, it wouldn’t be yours.
Final Thoughts On The Property Market And Foreign Investors In Bali
From medical centers to restaurants to villas, there are plenty of foreign owners of property in Bali.
Not every location is a sound investment but there are definitely opportunities to make money in the property investment market in Bali.
We must stress, however, that before you make any investment, anywhere in the world, you should talk to a qualified financial advisor or your accountant about making your investment.
