Investing in property in Bali is a common practice among foreigners. This is not surprising, considering that tourism in the island continues to thrive and the rental market is booming. Bali has been a favourite holiday destination for decades and is likely to remain so for a long time, with travellers flocking here from around the world. Over the past few years, the real estate market has performed very well, and investors are confident that property returns will continue to rise. This article will delve into the key points to consider before investing in the island’s real estate.
Content:
- Is it worth buying property in Bali?
- Where to buy property in Bali?
- What type of real estate should I buy?
- How much does real estate cost in Bali?
- How to buy real estate in Bali?
- Final tips
Is it worth buying property in Bali?
Bali is an excellent place to buy property both as a second home and an investment. The island has been repeatedly named the world’s top destination by TripAdvisor, and back in 2019, Forbes ranked Canggu as the fourth best place to invest. One of the advantages of buying property in Bali, besides its high profit potential and rental demand, is that foreigners can acquire property without having Indonesian citizenship.
Where to buy property in Bali?
Villas are a great investment as they generate an average return of 8–12%, depending on the location. Seminyak offers mansion options with the best yield potential, followed by Canggu. Real estate prices in Pererenan and Cemagi have risen sharply over the past few years, and if you are considering either of these destinations, you should act quickly while the cost of properties is still relatively affordable.
When choosing a destination, it is crucial to define your goal. Are you buying property for investment, personal residence, or both? If you are seeking a place for a peaceful lifestyle, consider purchasing a villa in Umalas or Canggu. These areas are very popular among expatriates due to the presence of international schools, banks, gyms, healthcare centres, and supermarkets. Homes in Ubud or Sanur are a great option for retirement, as this region has a more mature population and well-developed infrastructure. To enjoy truly breathtaking scenery every day, invest in property in Uluwatu, where you can admire ocean views from the hilltop.
If your investment aims for quick returns, you will not go wrong buying property in Seminyak, Canggu, or Pererenan, where villa rentals are highly lucrative.
Berawa is a place that is equally suitable for living and investing. It is the most sought-after area in Bali with a thriving real estate market. Villas for sale in Berawa are in demand due to their proximity to beaches, beach clubs, restaurants, and numerous attractions, allowing property owners to set higher rents than in neighbouring areas.
What type of real estate should I buy?
Is it profitable to invest in land, an off-plan project, or a completed house? If you have been living in Bali for some time and are familiar with the real estate market, consider investing in land. Building a villa may be cheaper than buying one, but finding small plots (300 m² or less) can be challenging. It may not be very profitable if you are constructing only one property. Whether you decide to build or buy a villa for short-term or annual rental, the key to a successful rental business is working with reliable real estate agencies and property management companies.
If your investment strategy involves resale, you can purchase an under-construction villa and then find a new buyer for it. In an off-plan complex, you can buy a house at a lower price. Acquiring an unfinished property involves higher risks compared to buying a completed home, but working with a trustworthy agent and a reputable developer is the key to the safety of such investments.
Note that in Bali, there are projects with a management programme. You contract with a company that handles the occupancy, maintenance, and promotion of the villa, while you are allowed to live in the house for a certain period (usually a month) each year. This way, you get a fully serviced country house that generates rental income, and you do not have to spend your time on organisational processes.
How much does real estate cost in Bali?
Luxury real estate, especially by the sea, is expensive (from USD 500,000 and up), but the price is justified by high returns and good occupancy rates. Finding a beachfront mansion can be genuinely challenging because owners are extremely reluctant to part with such lucrative assets. It is easier to buy under-construction villas, but first, you need to assess the projected financial performance of the property. One way to do this is to request a profitability analysis from the developer or the agency listing the property for sale.
If your budget does not allow for an opulent beachfront villa, there are plenty of worthy alternatives. Consider investing in apartments: you can find good units priced between USD 60,000 and USD 150,000 in and around Canggu. Alternatively, you can purchase an older villa and then renovate it. This will take more time but significantly cut expenses.
Real estate prices in tourist areas such as Seminyak, Kuta, and Canggu are very high, so for more affordable options, consider regions like Padonan, Babakan, Pererenan, Cemagi, or Tumbak Bayuh. Here, you can invest with a budget of USD 150,000 or less.
Keep in mind that you will also have to pay a 5% transfer tax and a notary fee. High-end homes (worth around USD 1.38 million and above) and apartments (starting at USD 690,000) are subject to a 20% luxury goods tax.
How to buy real estate in Bali?
The process of acquiring property in Bali can be safe and straightforward if you work with trustworthy partners. Indonesia’s legal system is quite different from that of European countries, and it is crucial to obtain quality legal advice before making any decisions.
A professional estate agency is the right place for you to go, as their experts can guide you through the entire transaction process, offer a reliable legal adviser, provide valuable investment advice, and find properties that match your search criteria. Opting for a real estate agency with experts fluent in your native language, English, and Indonesian is advisable to avoid translation difficulties. Choose an agent specialising in a specific area or neighbourhood, as working with such an expert helps avoid purchasing an illiquid property.
Avoid buying real estate using risky methods such as a nominee agreement (when the transaction occurs without official registration). There are only two safe options for purchasing property: leasehold (long-term lease for 25 or 30 years) and registering the unit in the name of a foreign investment company (PT PMA). Establishing a PT PMA requires resources but ensures more flexibility and better protection. Private investors can lease property in Indonesia for an extended period and rent it out to tourists, which is also a good strategy given the average annual return of 10%.
Final tips
Even if you are buying a home for yourself, consider renting it out for the time you are abroad. This will allow you to generate income, and your property will not be left unattended.
Should you hire a property manager or handle rentals yourself? It depends on how much free time you have. Property management requires constant attention. To avoid hassle, hire a reliable company that will take care of bringing in tenants and maintaining the villa. This way, you will not spend much time dealing with organisational issues while ensuring a passive income.
For more information about investing in Bali real estate, contact our specialists; we will be happy to assist you.