Should you invest in a dream villa in Bali?

By iProperty.com Singapore – October 22nd, 2010

 

Investment opportunities: Bali, Indonesia
It’s the Island of the Gods, but is it a worthwhile investment opportunity? iProperty.com Singapore investigates the appeal, logistics and expected returns of investing in a Balinese property.

The environment
Bali possesses spectacular beauty, a tropical climate, and a wide range of things to do – including rafting, surfing, and trekking. The island also has one of the most tolerant and relaxed cultures and societies in Southeast Asia. In addition, the Bali property market is relatively new and prices are still considerably lower than what you would pay in more developed countries.

Rental rates vary significantly depending on the villa type and layout. Upper-end villas in Bali can currently generate an average of US$1,000+ per night – but equally there are Internet specials advertising villas for US$300 for the weekend. Some developments offer a guaranteed rental return for a set period – anything from the first one to five years of ownership.

Where to purchase?
Most potential residents or holiday homers tend to avoid the backpacker enclaves of Kuta, Seminyak or Ubud, seeking instead somewhere close enough for a trip to the bars or a restaurant, but secluded enough to give privacy.

Another, cheaper, option though says David Conner, of property developers Karma Kandara, which sits close to Jimbaran Bay (home to some of the best seafood restaurants in Bali) on the southern peninsula of Uluwatu, is to go for somewhere more remote. “You probably get a more manageable price, infrastructure is constantly improving and in five years we believe villa owners will have realized some strong capital growth.”

Are there any laws or regulations foreigners need to be aware of?
Indonesian property law can be complex and it is recommend that potential villa owners consult with a local lawyer who is fully conversant with all applicable laws.
Remember though that under Indonesian law; only Indonesian nationals can own property freehold. With most developments, the property developer owns the freehold and the leased term for purchasers is 100 years. Indonesia is also one of the few countries without mortgages and foreigners cannot borrow capital to purchase property.

Are there any unexpected pitfalls?
Many people find that the cost and time devoted to the upkeep of a villa – a place that you actually only utilise for a short time each year – forces them to rent it out just to cover the costs. Some developments include maintenance fees in the initial purchase but individual villas will not.