What's going on in Bali?

What's going on in Bali?

Angus MacLachlan, Nusa Dua, Bali

I first became involved in the real estate business in Bali
eight years ago. It started when, as a customer, I tried to
secure a long-term rental property for my family. We couldn't
find any agencies geared for visitors, there were a few
Indonesian-managed "big brand" companies -- such as Century 21
and Ray White -- and many local Balinese advertising property
services in the local papers.

While everyone was extremely welcoming, we struggled to find a
suitable property. Three bedrooms, pool, air-conditioning and
nice garden was the brief. It was probably down to my ignorance
in speaking Bahasa Indonesia or a lack of choice but more often
than not agents did not turn up for their appointments or they
took us to see properties which did not come close to the brief.

We eventually found a lovely villa in Banjar Kuwum, way over
our budget but we had almost given up! The agent who found it for
us was always on time and understood what we were looking for. I
was so impressed with him that I decided to cut loose from my
comfortable marketing job in the hotel business and form a real
estate company -- Indonesian knowledge and European
organization ... lethal combination!. This was the start of
"House of Bali". Since then the property market on this gorgeous
Island has become unrecognizable from those pre-crisis years of
the mid-nineties. New players have entered the market, there has
been an explosion of website-based rental agents -- most of whom
are also dabbling in real estate sales -- and many brokerages got
greedy and started developing their own property.

This influx of supply has been fueled by the Balinese's
remarkable ability to deal with every adverse condition thrown at
them; bad publicity, bombs, viruses, economic and currency
collapse; you name it, they have endured it.

Yet land prices have been increasing by between 15 percent and
20 percent per year since the millennium -- except for a
12-month period after the Bali bombings in 2002, when prices
stuck, they didn't go down. In rupiah terms, the value of land
since the banks collapsed in the late nineties has increased by
over 400 percent.

The rupiah nose-diving from Rp 4,000 to Rp 17,000 against the
greenback has a lot to do with it but, when I first came here in
1997, land in Kerobokan was Rp 18 million per are ( 100 sq
meters), the same real estate is now over Rp90 million per are.

We expect this growth to continue for the next 5 years. Bali
is often compared to Phuket when it comes to property, so given
that prices in Phuket are about 40 percent higher than Bali -- it
is a much smaller Island of course -- it's reasonable to expect
that Bali will at least equal the prices of its Thai rival.

Certain specific areas of Bali will grow even faster than
this. The impact of the much heralded "sunset road", which is
inching its way up the west coast, should give property in the
Canggu area an extra 20 percent boost over the average for the
Island. For this reason we think that land located to the north
and east of the existing Canggu road -- around the village of
Kaba Kaba -- will provide great returns; it is relatively cheap
-- about Rp 25 million per are -- compared to Rp 150 million on
the adjacent beach and with a new road cutting the journey to the
airport by half this beautiful rural area of Bali will be a
convenient place to live.

Everyone must be careful not to overdo it though. There is
already evidence of over-development in some areas and the
prospect of the government banning building permits on green rice
field land is a welcome one; we hear this will happen in the next
three years ... and it needs to happen!

The sleeping giant as far as property investment, and return
of investment (ROI), is concerned is the east coast, Sanur, long
lambasted as "Snore", that quiet boring resort no one wants to
visit, is getting a make-over.

The infrastructure of the town is already vastly superior to
the west side, the beach is safe, the roads are fantastic and
it's getting a marina; we are just waiting for more trendy
restaurants. New luxury villa/resort developments are on the way
and the "sunrise road" -- the east coast's answer to the "sunset
road" -- already exists. Property on this coast is also
spectacular, with views of Mt. Agung -- Bali's largest volcano --
and Nusa Penida -- offshore island before Lombok.

I'm increasingly asked whether there will be an oversupply of
holiday-villa accommodation for rent in Bali. This is a question
prompted by the rapid growth of "guaranteed return" property --
the "guaranteed return", by the way, is often loaded into the
price ... don't be fooled! -- sprouting up everywhere,
particularly in Seminyak.

Getting past customs at the airport was always hard enough,
but now you have to get past ranks of property leaflet pushers as
well. We are concerned that the rental market for all these
villas will reach saturation point in a couple of years' time and
one of the prime reasons for this will be to do with the
airport ... there simply won't be enough airline capacity to fill
all these beds. By 2007 there will be an extra 10,000 villa beds
to fill, and that is not even including the eight new resorts
that are on the way ... how are all these people going to get
here?

The author is a founder of Exotiq Real Estate, an independent
property consultant in Bali