Author of the article:

Artem

Indonesia
Real Estate Specialist

Date:  27.01.2024

Reading time: 9 min.

Views:  893

In recent years, Bali has become a center of attraction for many foreign investors looking for profitable investments in real estate. Known for its beaches, culture and hospitality, this tropical paradise offers not only unique leisure opportunities, but also attractive investment offers. Our article is designed to provide an overview of the current situation in the Bali real estate market, identify key trends and dynamics, and present the features of the investment process for potential investors.

Overview of the current situation in the Bali real estate market

Bali is not only a popular tourist destination, but also one of the most attractive places to invest in real estate. Despite the impact of the COVID-19 pandemic, Bali's real estate market continues to show resilience. An important feature is the availability of both budget real estate options and luxury villas and apartments. Thanks to its favorable climate, beautiful scenery, developed infrastructure and high level of service, Bali is attracting more and more foreign investors.

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Reasons for the growing interest of foreign investors

• The favorable climate and beautiful scenery attract tourists from all over the world, creating a high demand for rental properties.
• The ability to earn a stable passive income from renting real estate makes investing in Bali real estate attractive to investors.
• The developed infrastructure and high level of service provide comfortable accommodation and recreation, which contributes to the growth of the tourist flow and increase the demand for real estate.
• Indonesia's political stability and neutrality create a favorable investment environment, ensuring that investments are protected from political risks.

All these factors together ensure a stable growth of the Bali real estate market and make it attractive for investors.

Bali Real Estate Market: Trends and dynamics

In recent years, there has been a steady increase in real estate prices in Bali. This is due to the increasing demand from foreign investors and tourists. However, despite the rise in prices, real estate in Bali still remains affordable compared to other popular tourist destinations.

Bali attracts investors with its unique culture, natural beauty and local hospitality. Combined with a well-developed infrastructure and a high quality of life, this makes the island attractive for real estate investment.

Demand for Bali real estate is growing not only among foreign investors, but also among the local population. This is due to the development of the island's economy, improved living conditions and rising incomes of the population.

Foreign investors are particularly interested in villas and apartments in tourist areas of the island, such as Seminyak, Kuta and Ubud. These properties are in high demand among tourists and can generate a stable rental income.

However, despite the positive trends, the Bali real estate market has its own risks. Among them are the possibility of changes in legislation, fluctuations in the local currency exchange rate, as well as natural and political risks. Therefore, before investing in Bali real estate it is important to analyze the market thoroughly and take into account all possible factors.

Investment process

Features of purchasing real estate (leasehold and freehold)

There are two main types of property ownership in Indonesia: leasehold (rent) and freehold (full ownership). A leasehold is a long-term lease that can last up to 25-30 years and be renewed at the end of the term. Freehold is a full ownership right available only to Indonesian citizens. However, foreign investors can acquire full ownership of the property through a nominee owner (usually an Indonesian citizen).

Transaction processing procedure

Registration of a real estate purchase transaction in Bali involves a number of stages: selecting the object, checking documents, signing a preliminary contract, payment and transfer of ownership rights. The entire process is usually accompanied by a lawyer or real estate agent.

• Legal aspects of real estate acquisition
• The legal aspects of buying a property in Bali can be difficult, especially for foreign investors. It is important to understand that foreigners cannot own land as a Freehold. However, it is possible to own real estate through a long-term lease agreement (Leasehold) or through the creation of a legal entity (PT PMA).
• Choosing an investment property
• The choice of an investment property depends on many factors. It is important to take into account the location, type of property, its value and potential for generating income. Special attention should be paid to checking the legal purity of the object and the availability of all necessary permits.

• Document verification
• Checking documents for real estate is an important stage when buying. It is necessary to make sure that all necessary documents and permits are available, as well as check the object for any debts or encumbrances.
• Signing the preliminary agreement
• After selecting the object and checking the documents, a preliminary agreement is signed, which sets out the terms of the transaction and the obligations of the parties. At this point, a prepayment is usually made.
• Payment and transfer of ownership rights
• After signing the preliminary contract, full payment of the property value is made, and then the property rights are transferred. This process is usually accompanied by a notary. Upon completion of the transaction, the new owner receives all the necessary documents confirming his rights to the property.

Strategies and investment returns

• Real estate use cases: rent, resale, personal residence
• Investing in Bali real estate can be not only profitable, but also enjoyable. Property owners can use it for rental, resale, or personal living. At the same time, the rental yield can range from 6% to 10% per year.
• Examples of profitability and factors influencing it
• The return on investment in Bali real estate depends on many factors, including the location of the property, its condition and demand for rent. For example, a villa in the Seminyak area, rented for $200 per night, can bring up to $30,000 per year.
• Investment strategies
• Strategy selection of real estate investment in Bali depends largely on the investor's goals and capabilities. For those who are looking for a stable passive income, the most suitable will be the option of long-term rental real estate. Those who are willing to take a risk in the hope of higher returns can consider the option of reselling the property after its repair or renovation. Finally, real estate in Bali can be a great place for personal residence, where you can combine vacation and work.

• Factors affecting profitability
• In addition to the location and condition of the property, the return on investment in real estate in Bali can be influenced by factors such as the quality of property management, the level of service and convenience for tenants, as well as the right pricing strategy. For example, offering additional services, such as cleaning, transfer, breakfast, etc., can increase the cost of rent and, accordingly, the return on investment.
• Calculation of profitability
• To calculate the return on investment in real estate in Bali, it is necessary to take into account all income and expenses related to the ownership and operation of the property. Income includes rent, while expenses include taxes, insurance, maintenance and repair of the facility, payment for the services of the management company, etc. At the same time, it is worth considering that the yield may vary depending on the season, economic situation and other factors.

Tax policy and obligations

Real estate tax and other tax aspects

Property owners in Bali are required to pay an annual property tax, which is about 0.5% of the assessed value of the property. In addition, a Transfer of Ownership Tax (BPHTB) of 5% of the transaction value is paid when purchasing a property. If the property is rented out, you must also pay a tax on rental income.

Impact of tax policy on investment decisions

Tax policies can significantly influence investment decisions. For example, high taxes on rental income can reduce the return on investment. Therefore, before buying a property, it is important to take into account all tax obligations and learn about possible benefits and discounts.

Legal aspects

When buying a property in another country, it is important to take into account legal aspects. Indonesia, including Bali, has certain restrictions on foreign investors. For example, foreigners cannot own land on freehold rights, but they can rent land for a long time (leasehold). Therefore, before buying a property, it is recommended to contact a lawyer or real estate consultant for detailed information and legal support.

Risk factors and the future of the market

Potential risks for investors

Like any other investment, buying a property in Bali involves certain risks. These include changes in legislation, unpredictable currency fluctuations, natural disasters, and risks associated with choosing an unreliable developer or nominee owner.

Forecasts and expectations for the Bali real estate market

Despite the possible risks, experts predict further growth of the Bali real estate market. As the economic situation improves and the tourist flow recovers, demand for real estate is expected to increase, leading to higher prices and higher returns on investment.

Risks associated with the legal status of real estate

One of the main risks in buying real estate in Bali is the complexity of the legal status of real estate. In Indonesia there are restrictions on the direct purchase of real estate by foreigners, so often used a scheme with a nominal owner, which entails additional risks. It is important to conduct a thorough check of all documents and contact a reliable lawyer or real estate agent.

Risks associated with economic fluctuations

Like any other market, Bali's real estate market is affected by macroeconomic factors. Currency fluctuations, changes in government economic policies, and inflation can all affect property values and investment returns.

Future forecasts

Despite all the risks, experts remain optimistic about the future of the Bali real estate market. Given Indonesia's steady economic growth, increasing tourist and foreign investor numbers, and strong government support, the island's property market is projected to continue to grow and develop.

Conclusion

Bali remains one of the most attractive destinations for real estate investment. Due to its unique culture, beautiful scenery, stable economy and political neutrality, the island attracts many foreign investors. However, as with any investment, buying a property in Bali requires careful analysis and planning.

It is important to consider all possible risks, including changes in legislation, currency fluctuations and natural disasters. It is also worth paying attention to the choice of developer and the form of ownership of the property.