How to successfully invest in a Bali villa in 2015

Update: November 2019

We have updated our Asia Pacific Villa Market Study. Find out about important market trends to watch.

Update: June 2018

We have released a step-by-step guide to investing in a Bali villa and have also launched a marketing and distribution solution for villa owners looking for a return on their villa investment.

October 26th, 2015

The good old days of Bali’s affordable property prices are long gone; Asking prices for villas in Bali have more than doubled in the last 2 years.

Bloomberg just reported about Bali: “The world’s hottest island property market is about to get even hotter”. Question is where exactly is the island heating up and how much hotter can it get? Bali Villa Finder, the leading agency in Bali for villa rentals, has just published an infographic based on 12 months of villa rentals data, illustrating many insights on Bali villa investments.

Properties prices are soaring in Bali (they increased by 15 percent last year, significantly more than the 5% increase in Ibiza) according to Knight Frank’s recent report. Much of this growth is attributed to the domestic and foreign buyers such as Australians, French, British, Singaporeans and Hong Kongese (The Guardian, 2013). "Bali continues to be a magnet for foreigners. It is a popular destination and has large affordable houses that can be turned into rentals easily” shared David Chambat, CEO of Bali Villa Finder. “Australians represent about 20% of our villa owners in Bali. With the fall in value of the Indonesian Rupiah, more foreigners, especially Australians, will be interested to invest in Bali properties.”

There are some concerns that supply is outstripping demand for villa rentals. “Since July 2014, in the context of low Australian dollar, demand growth has slowed down, and we have observed that the overall occupancy rate on rentals has started to decrease. A good sign is that compared to last year, we have twice as more villa owners approaching us to list their villa while the demand only grew by 10%” - Chambat states. So is it still worth investing in Bali? Bali Villa Finder remains upbeat about the market and shares their insights.

Insight 1: Know your target market

In 2014 and 2015, the largest number of visitors to Bali came from Australia - a fact confirmed by Bali Villa Finder. This comes as no surprise, as Australians have always been the biggest market for villa rentals. However, the rest of the ranking is more varied: Singaporean and French visitors - respectively ranking 7th and 9th in number of arrivals - are the 2nd and 3rd largest market for villa rental. The Chinese and Japanese combined together represent an estimate of 25% of all arrivals. However they are not yet significant consumer segments in villa rentals market as they still prefer hotels to villas.

Daniel Rouquette, Head of Marketing at Bali Villa Finder explains: “While these nationalities go for different accommodation type, they also have different expectations and preferences when it comes to villas.” For instance, Singaporeans tend to prefer villas with modern designs situated in a centralised location such as Seminyak, the French prefer villas featuring traditional design and surrounded by nature. Furthermore, preferences will vary between individuals in a family or a group of friends. Another way to cater to the right audience is to get listed in platforms that have a strong presence in your target audience which is critical in boosting your yield on investment.

All of these are important points that villa investors should keep in mind when trying to assess the potential of their villa.

Arrivals to Bali by nationalities - Rank 2015 (Data from Bali Government tourism office)	Nationalities of Bali Villa Finder clients - Rank 2015 (data from Bali Villa Finder)
Australian	Australian
Chinese	Singaporean
Japanese	French
Malaysian	British
British	Hong Kongese
South Korean	Indonesian
Singaporean	American
Taiwanese	New Zealander
French	Malaysian
American	German

Insight 2: 75% of villa travellers want Seminyak

During the past 10 years, boutiques, restaurants and bars have transformed Seminyak into one of the trendiest destinations in the world. While Kuta still entices many backpackers and Ubud many yoga lovers, Seminyak is the go-to destination for villa travellers. With a potential gross revenue of $76,270/year (the highest among all locations), Seminyak is the best and safest investment you can make in Bali.

While Seminyak is a magnet that attracts most travellers, the shortage of land has caused prices to rise, forcing many travellers to seek accommodation in Seminyak’s immediate surroundings. Data gathered by Bali Villa Finder confirms this trend: 75% of their inquiries are for Seminyak but a large part of these travellers can’t afford Seminyak prices and chose instead a villa in a nearby location (Canggu, Umalas, Kerobokan, Legian).

Insight 3: North Bali is the hidden gem

“What is the most popular isn’t necessarily the best” - David Chambat, CEO of Bali Villa Finder

Despite Seminyak being the top destination in Bali, there is another underrated destination: the North of Bali. Villa investments in this area require the shortest break even time.

First of all, the cost of the land is 10 times cheaper in the North of Bali than in Seminyak, thereby reducing the initial investment. Secondly, this destination is popular with European travellers, particularly the French and Dutch. The villas here yield high occupancy rates throughout the year, as there are less villas situated here.

For these reasons, it takes an average of only 7 years for investments to break even in North Bali whereas trendy Seminyak requires around 8 years. It is also important to note that the planned construction of a new airport in North Bali will help more travellers reach this remote destination (currently 5-6 hours drive from the South Bali airport). It would not be surprising for prices to soar as more travellers discover this hidden gem.

Insight 4: Know what locations offer a good return

Based on Bali Villa Finder’s analysis, despite the distinct characteristics, the other locations in Bali have similar break even yields: around 10 years. For example, the East of Bali has a low occupancy but commands high prices, when Canggu is the opposite.

Ubud is the riskier investment due to a combination of low occupancy, high number of existing villas and low night rates. “A typical mid-market Ubud villa lease over 25 years would cost you around 250,000 USD and you can expect returns in the range of 20,000 USD a year so you will probably be able to break even in 12 years” states David Chambat.

Insight 5: Consider neighbouring islands

Bali is still a hot property market, but it is not the only one investors should look at. The neighbouring islands such as Flores and Lombok are beginning to get a share of Bali’s limelight.

Lombok tourism and infrastructure will be improved tremendously within the next few years with the help of $3 billion investment from the government, directed in part to a new international airport with direct flights from Australia and Singapore. To convert Lombok into the “next Bali”, Indonesia’s largest tourism developer has also stepped in to embark on the Manalika resort project, which aims to be a breakthrough for Lombok tourism industry. Flores has strong alluring attractions including Komodo National Park, that is well known for being one of the new 7 UNESCO natural wonders. The government has also boosted Flores tourism by investing on infrastructure projects such as Labuan Bajo’s airport that connects the island with Bali.

Of course, the risks here are higher since these are new markets with an unproven potential. Also, the real estate sector is not as well organised and scams are a reality. That being said, as everywhere, there will be a reward for being the first comers.

About Bali Villa Finder:
Founded in 2012 in Singapore and Bali, Bali Villa Finder is a villa rental distribution website. Their growing portfolio includes 500 villas all around Bali. Bali Villa Finder cares deeply about the villas they choose for travelers. Authenticity of the villas, quality, customer service, and great locations are at the heart of what they do.

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Yvonn Ong

Communication Specialist

daniel@villa-finder.com

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