C9 Hotelworks and Horwath HTL Release New Bali Report
Frankly speaking, Bali real estate remains one of Southeast Asia’s unlocked mysteries. Since the disruption by both internal and external factors such as the country’s disruptive tax amnesty program that ran from 2016 to through 2017, and succeeding volcanic eruptions, the property sector has yet to find a new normal.
Looking at what sector should be the poster child for the industry, branded hotel residences, the first indications of a market flux are clear. According to our research there are over 1,600 units in seven projects that are either on hold or have been canceled. This includes brands such as Mandarin Oriental, Jumeirah, ACCOR, and Amari. In a failure to launch syndrome, financial issues are cited as the leading cause to pause.
If you turn back the clock a decade, the branded residences segment was at the top of its game headlined by properties affiliated to Aman, Alila, W, Bulgari, Banyan Tree, Anantara and others. At that same juncture time a large critical mass of midscale condo hotels sprang into the market, capturing domestic investors real estate appetite and lure of guaranteed yields and holiday usage. Roll into 2020 and this sector has somewhat cooled, and domestic ‘off-plan’ speculative buyers have shifted focus into other products and geographic areas.
One of the fundamental characteristics of Bali that is different from say Phuket, which is Asia’s biggest resort real estate critical mass, is the lack of foreign ownership vehicles. Where in Thailand overseas buyers can buy freehold condominium properties, though there are project thresholds, this is not the case in Indonesia. Hence, the regime is leasehold and terms can vary depending on structure and interpretation by government agencies.
Legacy real estate for foreigners in Bali that started in the 1980’s and 90’s used either shorter term leased for land and villas were build or else nominee structures. The tax amnesty by and large put the nail in the coffin of the latter age old structure on a wide-spread basis. So today, projects often require two types of structures and in some cases even segregated products for domestic and international buyers.
Let’s fast forward into 2020 and look at compelling trends in Bali’s property scene –:
- Freehold is by and largely preferred by Indonesian buyer who represent over 50% of transactions. They are typically from Jakarta, Surabaya and Makassar.
- Lets’s chat about the China as roll back a few years and it was forecasted to lead the pack of volume buyers. Over the past two years as China – US trade economic issues rose, the expected volume has not materialized nor have large Chinese developers introduced yield focused entry level condo hotels as they have across Thailand.
- In pure leasehold projects, these are aimed at overseas buyers who come from Australia, North America and Europe. Three key international emerging markets are Russia, Japan and South Korea.
- Locational demand is on the move, Canggu and Berawa becoming expat haven’s surrounded by international schools, beach clubs, co-working spaces and digital nomads.
- While Seminyak, Uluwatu and Jimbaran all remain attractive depending on buyers lifestyle preferences.
While this is all a lot to take in, there remains potential in Bali’s real estate ambitions, but the new trends include smaller entry level pool villas that are priced in line with shorter lease terms. Next are co-living developments who are lifestyle centric and work on rental not ownership model. Lastly, we see more upward trajectory in lower but sustainable rental yield properties that work on more traditional real estate fundamental.
As for the new larger stop forward the elusive gamechanger remains Indonesia’s long delayed reforms on foreign ownership or at least some movement in the condominium sector.
To download and read C9 Hotelworks and Horwath HTL’s Bali Hotel and Branded Residences report click on the following link