Luxury
property prices in Indonesia are rising faster than anywhere else in the world,
according to a new report
The Guardian, The
Observer, Kate Hodal, Saturday 9 March 2013
 |
Foreign investors are flocking to buy property near Bali's beautiful beaches.
Photograph: Patrick Frilet/Rex Features |
They teeter
along in stilettos and backless dresses, their partners in partially open
buttondown shirts, and duck into restaurants serving champagne, truffles and
peppercorn steaks. Afterwards, these crowds of upmarket Indonesians and expats
will head to any number of bars along the bustling artery of this once sleepy
seaside village of Seminyak, a now vibrant town on the island of Bali that 10
years ago was lined by rice paddy fields and populated with farmers.
All along
Jalan Laksmana, Seminyak's main thoroughfare, glass-fronted stores sell
high-end surfer-inspired chic, such as £125 bikinis and organic wheatgrass
shots, while restaurants cater to the many bule – foreigners – by offering
Japanese, Italian and fusion Indonesian cuisine at candlelit tables with
Ibiza-like club music on the sound system. Firms with names like Exotiq
Property and Elite Havens detail beachfront villas running at £1.5m and higher,
showcasing homes close to "the action" – Bali's famous hangouts like
Ku De Ta and Potato Head, where languages overheard can range from French to
Russian to Chinese.
Bali has
long been famous as a playground for both the rich and the not-so-rich, easily
providing both villas and backpacker hostels so that visitors can enjoy its
white sandy beaches and turquoise waters whatever their budget. But now this
island of 4 million is finding another kind of fame – as a major investment
opportunity for the luxury property market.
Luxury
property prices in 2012 jumped in Indonesia by more than anywhere else in the
world, according to research by Knight Frank. The capital, Jakarta, saw an
astonishing increase of 38% in luxury property prices from 2011, and Bali came
in a respectable second at 20%, tying with Dubai.
While
Monaco may still be the world's most expensive place to buy a residential
property– homes there can cost up to $5,920 (£3,960) per square foot – if
Indonesia keeps up this pace, that could soon change. There are now more
millionaires in Asia than anywhere else in the world, and in Indonesia, whose
booming economy could surpass the UK's to become the world's seventh-largest by
2030, individuals' net worth has shot up 7% year on year.
What does
that mean? In simple terms, says Zoe Rice of property firm Elite Havens'
flagship Seminyak office – a low-slung, white-and-blue, beachhouse-themed
property that looks as though it should be facing the Indian ocean rather than
the village's busy square – property investment in Indonesia is simply
"better value than keeping money in the bank".
Much of the
growth underpinning Bali's healthy property market comes from domestic buyers,
notably the wealthy players of Surabaya and Jakarta, says Rice. But there is
also a steady stream of buyers from Australia, France and the UK, and Asian
expats from Singapore and Hong Kong, who are keeping the market afloat. And
they're not just purchasing second or third holiday homes: vacant land is the
number-one choice for Indonesians, followed by hotels, condo-hotels and private
villas. For foreign buyers, purchases are of homes and villas for full-time
residential use; a market report to be released this week by Elite Havens cites
Bali's high tourist arrivals, healthy economy and shifting of government debt
to investment grade as reasons why the island is "resilien[t] and [a] safe
haven for investors in these globally turbulent times".
"Capital
appreciation has been substantial [in Bali] in the past decade," says
Rice. "There's been a dramatic increase in Seminyak, where land prices
have almost tripled in the last two years because demand is so high and supply
so low."
All this
has not been lost on local people, many of whom have taken to nicknaming the
island kampung bule – "whitey town" – because of the sea of
foreigners swarming Bali's streets and beaches.
"Housing
in Bali is expensive now because many bule live in their own private villas,
and they buy with dollars and pay dollar prices," says 31-year-old Budi
Susila, a taxi driver who spends his days transporting foreigners around the
island. "That makes locals want to sell their land to bule, which makes
more bule interested in moving here, which means that every year we lose more
rice paddies and more greenery. The government gives permits very easily for
new construction because they get money in their pocket."
Expat
hotspot Seminyak has just lost its last rice paddy, says Rice, who claims that
the central road that cuts through Legian and up to Seminyak was "lined
left and right" with them a decade ago. Now the roads are choked with
taxis, 4x4s and motorbikes manned by tanned blonds with surfboards in tow, who
snake along many of the busiest areas in southern Bali in traffic so heavy that
a 30-minute drive can easily turn into a two-hour one.
Non-beachfront
land around the most sought-after areas, including Seminyak and Petitenget, is
now worth 2.5bn rupiah per 100 square metres – £171,000 – with prices
decreasing the further north and inland one travels, Rice says. But much of the
attraction of buying land or property in Bali is being close to the action:
Seminyak serves as the de facto centre of Bali's expat beachfront scene, as it
is home to world-class restaurants, clubs and bars, where the rich and
beautiful can chill out with bottles of champagne over views of Bali's famous
sunsets. But even in Ubud, where organic markets and yoga studios rub shoulders
with art galleries in what is deemed Bali's northern "cultural
centre", land prices increased some 55% in 2012, according to research by
Elite Havens.
In Jakarta,
which saw a 38% jump in its residential luxury market prices last year, the
story is a little different. There, buyers are investing primarily in flats in
the central business district in projects that developers are calling
"critical housing" – prime property in an overcrowded metropolis of
12 million, says Knight Frank's Hasan Pamudji.
"The
economy in Indonesia has been growing roughly 6% every year for the last few
years, so there are more rich people in Indonesia now than ever," he says.
"But middle and lower incomes have increased as well, which has increased
the demand for property."
Although
the city is home to extravagant, multimillion-dollar mansions lined by
barbed-wire fences, it is flats, rather than houses, that are the new property
of choice for those buying property in Jakarta because "they offer
security, safety and easy transportation", says Pamudji. "Traffic
congestion in Jakarta is very bad, so some buy condos close to their work or
business, which saves them having to commute every day from the suburbs or further
away."
Often these
condos are the first investment for young couples or upcoming wealthy
individuals, he adds, with the average price in downtown's "Golden
Triangle" retailing at 30m rupiah – £2,050 – per square metre.
Back in
Bali, development can be seen pretty much everywhere along the southern coast,
with old buildings bulldozed to make way for new commercial properties, among
them glittering cafes and restaurant ventures to cater to the ever-burgeoning
market of wealthy clientele. In the upmarket beachfront Canggu area, Echo Beach
is now home to an InterContinental hotel and the Sea Sentosa project, a resort
that calls itself "the benchmark for unparalleled luxury", while a
Sunset Road extension is planned to link the capital, Denpasar, with Bali's more
western beaches.
But there
has been so much development that the local government has recently placed a
moratorium along the most congested beachfront areas and is encouraging growth
in the island's more remote locations instead. Even there, however, investment
can prove tricky, says Australian investment banker Richard Jenkins, who moved
to Bali three years ago from northern Australia with his wife and two young
children. Having bought a clifftop plot of land in Uluwatu, a windswept, still
undeveloped area on the island's most southern tip, the Jenkinses planned to
build their own house – but the permits were never forthcoming.
The family
now want to move to a £1m property in Seminyak with three villas that they plan
to renovate, turning two into holiday rentals.
"This
is a good place to invest, definitely," says Jenkins. "There aren't
that many places to say that about in the western world. But while it is a
positive real estate market, I do get the impression of a looming glut: there's
just so much building here going on, and it's all for the tourist market."
