The following are excerpts from and article in Financial Review
Deborah Cassrels
Oct 8, 2021 – 3.35pm
Foreign
and domestic buyers are circling deals in Bali’s devastated property
market, but agents say the window of opportunity is closing rapidly.
Walk through Bali’s once-thriving tourist hubs and you’ll find scenes resembling some apocalyptic wasteland.
Among desolate villas and hotels testifying to the economic ravages of the 18-month pandemic are shops reduced to rubble in preparation for rebuilding and the next tourist surge.
When that will happen is unclear. Australians’ favourite holiday precincts, Kuta, Legian and Seminyak, once housing some top-tier restaurants and hotels, have transformed into eerie ghost towns since the island closed to international tourists in April last year.
But on Thursday, Bali will reopen to international tourists from China, Japan, New Zealand, South Korea and the United Arab Emirates.
Wayne Lees has spent just $10,000 renovating and maintaining his new 300 sq m property, including pool retiling and paving. Made Nagi
How that plays out will be keenly watched. Desperate to kick-start Bali’s tourism industry, which pre-pandemic contributed 60 per cent to its GDP and $12 billion of its annual revenue, the provincial government has its hopes pinned on a gradual recovery.
The 6.3 million foreigners who visited in 2019 – among them more than 1 million Australians, who top the list – are a distant dream. COVID-19 has battered the island and the road back is cautious.
High
vaccination rates, safe travel procedures and quarantine are the
priority as case numbers finally tumble after the delta variant
overwhelmed the island mid-year.
Since early August, when Bali’s
positive cases peaked at 1910 with 51 deaths, there has been a
turnaround. Cases dropped to 60 with three deaths on October 6 as high
vaccination rates kicked in. Single jabs hit 98.4 per cent, with 80.4
per cent of residents now fully vaccinated and health workers receiving
booster jabs. Should travellers fall ill, 62 COVID-19 referral hospitals
are on tap, collaborating with nearly 2000 hotels, restaurants, retail
and tourist areas. There are QR codes for checking in and non-compliance
on mask-wearing incurs a $100 fine for foreigners and $10 for locals.
Reflecting
the island’s parlous economic state, investment opportunities are
knocking, with foreign and domestic bargain hunters, or vulture buyers,
eyeing villas, hotels, restaurants and land.
Real estate agents reject predictions Bali will never recover. Made Nagi
One
who has got bang for his buck is Wayne Lees, a 57-year-old retired
driving instructor from the NSW Central Coast who bought a spacious
three-bedroom villa with pool in Seminyak in January for $200,000 at a
50 per cent discount.
The South Australian vendor built the villa
in the fashionable district in 2009 and managed rentals from Australia.
Her leasehold land agreement, expiring in 2036, switched to Mr Lee, who
plans to extend it.
Of about 50 villas he inspected, Filo’s
Paradise Villa, as an investment property near the beach, ticked all his
boxes and has already borne fruit. Domestic tourists have snapped it up
to rent for November, and Mr Lees sees a steady domestic market filling
the void until April.
Mr Lees, who lives in nearby Legian, has
spent just $10,000 renovating and maintaining his new 300 sq m property,
including pool retiling and paving. Like the other villas he viewed,
“it had been empty and hadn’t been maintained for two years during the
pandemic”.
“The owner lost interest and had some financial problems. I got it for a pretty good price.“
Seven
Stones Indonesia real estate owner Terje Nilsen has 200 foreigners on
his waiting list looking for property. There are projections that Bali
will never recover, he says. “I don’t think that’s realistic. People
will travel.
“When COVID came along … there were some price
reductions, particularly from Australians who held long-term leases and
couldn’t get in here any more. It just becomes an expense. But most
people have decided to wait.”
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Jalan
Padma in Legian ... Kuta, Legian and Seminyak, once housing some
top-tier restaurants and hotels, have transformed into eerie ghost
towns. Made Nagi
He cites terrorist attacks and the 2008 global financial crisis
as litmus tests of Bali’s resilience. “We haven’t seen any crash –
maybe a 15 to 25 per cent drop with a few clients who are desperate and
need to sell for financial reasons.”
Nilsen says that, during the
pandemic, Bali’s lifestyle with few restrictions drew digital nomads,
entrepreneurs and a large domestic market – those fed up with being
confined to small apartments in Jakarta as case numbers spiked.
“For the first time, we’re seeing a lot of Indonesians renting long-term villas with a view to investing.”
But
he’s finding broad interest – some politically driven – from Hong Kong,
the United States, France and Britain mainly for villas and land north
of Canggu, Ubud and Jimbaran in the south.
In a growing trend,
people are seeking larger plots for vegetable and fruit-growing, leaning
towards sustainability and alternative lifestyles post-COVID-19.
“Australians
are not yet speculating as to when they can travel to Indonesia, but
bargain hunters are here, especially now there are signs of opening up.
“If
you want a deal, you’ll have to do it now. I think there’s a window of a
couple of months, then the market will start coming back again.”
See Also
| Bali Governor Claims That 20,000 Hotel Rooms Are Booked For November |
A deserted tourist centre in Jalan Padma in Legian. Made Nagi
Nilsen
believes the Airbnb villa model will evolve into long- term
residential. “The villa market will be fine. There’s a question mark
over the big hotels.”
Insiders predict the established villa
market will provide what people now seek more than ever: safety in an
isolated, manageable, hygienic environment.
For foreign
investors, however, the Indonesian market is a minefield. Foreigners are
not permitted to own property or buy freehold, but that hasn’t always
stopped those circumventing regulations – which often leads to
expensive, legal problems.
Many have been burnt in still-used,
illegal nominee ownership schemes to acquire freehold property using
dishonest nominees on the title. Leasehold or company structures are
common, but investors swept up in the moment can overlook due diligence.
Long-term
lease contracts – the most reliable – allow foreigners to lease
property for 75 years, with extensions every 25 years, though the title
remains under the name of the original owner.
An expensive, complicated option is for foreigners to establish a company and buy property under that structure.
Ketut
Wardana, chairman of the Association of Indonesian Tours and Travel
Agencies, laments Bali’s predicament: “Many hotels and villas would like
to sell. It is a good investment opportunity for those who have
capital. They can buy property at a very good price.“
Mr Lees bought a three-bedroom villa with pool in Seminyak in January for $200,000 at a 50 per cent discount. Made Nagi
But
he says the central government needs to re-evaluate foreign investment
regulations for ease of purchase and to help debt-ridden potential
vendors.
Because of ownership restrictions – other than leasehold
– foreign investment has declined significantly in favour of less risky
and friendlier destinations for capital, says a Bali-based property
adviser.
At least 100 hotels are bankrupt, which, while
problematic for Bali, represents a good vulture capital opportunity for
investors – assuming international travel will ever return to its
pre-pandemic condition, he says.
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