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