Bali is a top holiday destination in the world and it is famous for the beaches, the scenery, the art, the tradition and culture, the dance, the “night life”…etc…and most importantly the warm and friendly character of Balinese People. The growing tourism in the Island offers a great diversity of real estate investment opportunities that will be explained here.
A. REASONS WHY TO INVEST IN BALI
- 1. Growing influx of Tourists:
BALI still remains as one of the ‘top holiday destinations’ in the world. Despite the current global financial crisis in Europe, both domestic and international passenger arrivals in Bali continue to increase (2.9 million foreign tourists visited Bali in 2012 with an increase about 5% over the total for 2011 according to data from “Central Statistics Agency BPS”).
The top ten sources of foreign tourist arrivals in Bali are Australia, China, Japan, Taiwan, Malaysia, Russia, South Korea, Singapore, the United States and Britain (other countries follow like France, Germany, The Netherlands…etc..).
At the same time, Bali’s tourist market is becoming more diversified with an increasing number of domestic tourists visiting the island (number of domestic visitors in 2011 was around 5.7 million according to BPS).
- 2. Rising Demand and Property Appreciation:
The growth in tourism is a very positive sign for potential property market investors as tenancy demand is likely to increase. Therefore tourism makes land prices increase drastically in key tourist areas: for example land prices in Seminyak, Bukit beach or cliff front, Jimbaran, Canggu Beachfront & Tanjung Benoa have increased as much as 300% in the last 5 years and they still continue to rise.
Tourism is expected to grow strongly over the next 10 years at 5.8% average annual growth (according to “World Tourism and Travel Council WTTC”) so land and property prices are also expected to continue growing.
- 3. Growing Number of Residents in Bali:
Currently, an estimated 60,000 foreigners (these figures are not confirmed) are living in Bali with a temporary residency permit. The number of foreign residents is also expected to increase, especially people who want to retire and live in Bali on a Retirement Visa. This also increases the demand for housing/tenancy.
- 4. Stable Economic Growth:
The Indonesian economy grew roughly by 5.2% in 2010 (it has been growing roughly 6% every year for the last few years). Indonesia is one of the 2012 top 10 growth markets in the luxury residential sector with both Jakarta (+38% increase in luxury property prices) and Bali (+20%) (according to Knight Frank research).
- 5. Good and affordable Air Connections:
Bali Island is very well connected with the rest of the World with many domestic and international Air Companies operating in the Island. Besides there is several budget airlines that offer inexpensive air tickets connecting Bali to various locations across the country and internationally.
- 6. New Infrastructure in the Island:
There are many plans for new infrastructure ongoing on the Island to accommodate the growing tourism and population:
Expansion of Bali Ngurah Rai International Airport (This is located in southern Bali, 13 km south of Denpasar) to cope with an increase in international passengers, expected to be completed by 2013 (estimated progress in Jan 2013 was 55%). It is Indonesia’s third-busiest international airport. With the renovation works it is expected to become the best airport in Indonesia.
New toll road and underpass connecting southern Denpasar with Ngurah Rai International Airport and Nusa Dua to improve the traffic congestion situation, completed in 2013.
The new Sunset Highway that will enable visitors to Tabanan to bypass the congested streets around Kuta and Seminyak. The new extension of Sunset road will connect the south side all the way up to the harbour up in the northwest coast, therefore land prices in the surrounding areas are expected to rapidly increase.
New Airport in the North of Bali: It has been recently confirmed that the coastal village of Kubutambahan, around 10 kilometers east of Singaraja in north Bali, is the designated location for the planned construction of Buleleng international airport (expected to start in August 2013 although not confirmed)
The expansion of the Tanah Ampo (Karangasem) Cruise Terminal to be completed in 2013 will enable it to receive bigger cruise ships with international standards of between 300 to 500 meters in length.
B. INVESTMENT OPTIONS
Investors that either buy villas or hotels and develop them successfully, can potentially sell the property later with capital gain, while earning an income via tourists.
There is a number of investment choices:
- 1. Buy an existing stand-alone Villa for Rental:
Location and condition of the Property are top conditions to take into account when buying. A villa with a rental history is much more easy to evaluate its costs and its actual earning potential.
- 2. Buy an existing Villa within an Estate Complex for Rental:
This means there is a number of villas which share certain facilities and services in common. Some Estates are very popular because their management companies are very experienced and their marketing, service and financial histories are also very established so they can ensure a good return on investment to the purchaser.
- 3. Buy Land purely for investment purposes:
Buying and trading in land in Bali is a very attractive business due to the ongoing high increase of the land prices. Purchasing land requires a very good understanding of the importance of location, development trends, and local conditions. Beachfront and cliff-top land are always the best options. It is essential to count with professional and reliable legal advisors and notaries to help through the land pre-purchase due diligence process.
- 4. Buy land and build your own Villa or Villa Complex:
The main advantage is the flexibility in the selection of the location and the design of the Villa, and besides this is a much more inexpensive option than buying an already built Villa. Later on the Villa can be sold to enjoy a very substantial benefit, or dedicated to rental with the help of a rental management company. It is very important the selection of a reliable and experienced construction company for building your Villa. Our Company can be your contractor and we will arrange all the necessary building permits and licenses, we can also assist you in the search and purchase of the land through our network of local land owners, prepare your villa design and construct your villa with the best quality standards.
- 5. Purchase Villa ‘Off-Plan’:
This means buying a property from the developer/construction company already designed or by viewing a ‘show villa.’ The main advantage is the lower prices offered by the developers/contractors, and that the payments can be done in stages (payments according to construction progress). It is essential to ensure that the developer is reliable and experienced, and has a history of successful completion of similar projects in Bali. We are contractors and also developers, so we have also development projects “off-plan” so you may contact us for more information.
- 6. Buy an Apartment:
This is a new option in Bali that is expected to grow rapidly as developers are forced to come up with vertical solutions due to the rising land prices.
C. BEST LOCATIONS TO INVEST
LOCATION is the most important factor in Bali as anywhere else in the world. Land and property prices in beach front locations and/or offering spectacular views and/or close to popular centre areas will increase the most, and will be the easiest to rent out or sale.
Some of the popular spots in Bali include:
- Kuta, Legian, Seminyak, Petitenget and Batu Belig:
These are the most popular areas in Bali, close to the “action” and to the beach, and therefore land prices have sky rocketed in the last few years.
This is one of the most demanded residential areas, with many luxury Villas built in the area, offering a great investment potential.
- Berawa, Canggu and Seseh/Cemagi:
This area has undergone a very substantial development over the last few years and now there is many luxurious villas, boutique hotels, and other businesses.
- Tanah Lot:
This area is growing in popularity, despite it is a bit far from Kuta/Seminyak area, but it is suitable for those who seek the rural lifestyle and to be near golf facilities.
This area is for those who want to live in the middle of rural Bali, but it is not still a proper holiday rental destination because of its far dricig distance/time from the tourist attractions of the south. But this could change soon with the plans underway to extend Sunset Road all the way through to Tanah Lot.
This is the area in the south of the Airport, close to Jimbaran Beach, very popular for tourists.
The Bukit is the large hilly area at the very south of the island. It has attracted huge investment over the last decade and certain areas have proved to be some of the best real estate investments in the world. The famous surf breaks and beaches of Bingin, Padang Padang, Dreamland and Balangan are the major features in West Bukit and Uluwatu.
- Nusa Dua:
This area accommodates large luxury hotels, and has many others under development.
This area appeals to those intending to live on the island for extended periods, there is many foreign residents including many retirees and family with children living here looking for a more quiet location than the south west coast.
This area has considerable appeal to those who prefer a more cultural or traditional approach.
Since the building of the East Coast Bypass known as the ‘Sunrise Road’ that has cut travel time from Sanur, the area is about to experience a huge development.
The new East Coast Bypass which starts from the airport passes through Sanur and runs the whole way up to the deep water port and the cruise ships at Candi Dasa, has opened up a number of coastal communities to development.
Spot in the East coast very popular for diving.
The most recommendable locations from investment point of view are in the Bukit (in the South of Bali), the beach front area from Seminyak to Batubelig and to Tanah Lot on Bali’s West coast, and in or near the town of Ubud. These locations promise to produce the highest increase in value over the next few years.
In the long term, the area between Tanah Lot and Negara as well as the coastal areas in Bali’s North-East (Karangasem) should also offer attractive price increases.