Interest in Bali homes may rise as govt looks to relax rules

JAKARTA — Bali, the world’s hottest island property market, is about to get even hotter: demand from Singapore investors is expected to surge as soon as the Indonesian government revises foreign ownership rules in the next few months.

Prime residential prices in Bali, known for its surf and rice-paddy landscapes, rose 15 per cent last year — the most among comparable destinations tracked by broker Knight Frank. The cost of villas on the Spanish island of Ibiza climbed 5 per cent and slid 8 per cent in the Italian region of Sardinia, said the report.

Bali’s gains are set to continue as the Indonesian government this week starts to discuss the revision of rules to let foreigners directly own luxury apartments in the archipelago, with hopes of implementing changes within two to three months. Currently, foreigners are not allowed to own property in Indonesia.

“If you look at how close Jakarta is to Singapore, and given that a lot of Singaporeans also work in Indonesia, there will be interest from Singaporeans,” said Ms Christine Li, director of research at property broker Cushman & Wakefield. “Indonesia is still one of the biggest ASEAN markets in terms of population (and) land size, so there’s definitely a lot of room to grow.”

The Indonesian government’s meeting will include a discussion on the conditions governing real-estate purchases by non-Indonesians, including size restrictions, said Dr Sofyan Djalil, Coordinating Minister for Economic Affairs last week. The government will coordinate with the immigration and tax offices to draft the revisions, he added.

Under the proposed amendments, foreigners will be allowed to buy only luxury apartments and not landed property. Currently, they can get around the ban against owning real estate in Indonesia by using local citizens as proxies or by structuringa purchase as a long-term lease.

Mr Nathan Ryan, owner of property brokerage Bali Realty, expects interest from China and Singapore once the revisions are made.

“Asian buyers are no doubt a sleeping giant for Indonesia,” said Mr Ryan from Kerobokan, an area north of Kuta known for its surf and nightlife. “These buyers have plenty of money, but are turned away by the leasehold property options, as they would prefer to be able to buy freehold.”

Property prices in Jakarta, about an hour’s flight from Singapore, increased 11 per cent in March from a year earlier, Knight Frank data shows. That is the biggest gain in Asia after Bengaluru in India, where real-estate costs rose 13.6 per cent.

Previously, Mr Setyo Maharso, a member of President Joko Widodo’s campaign team, said the government would allow foreigners to buy property of at least 2,153 sq ft and worth a minimum of 2.5 billion rupiah (S$254,000).

The revision “will lend support and perhaps counterbalance the slowdown in economic conditions,” said Mr Chua Yang Liang, head of research for South-east Asia at real-estate broker Jones Lang LaSalle.

“Providing ... real estate transparency and clarity of policies is important in any transaction, so this will probably lift demand if it makes it clearer.” BLOOMBERG