The world’s hottest island property market is about to get even hotter.
Prime residential prices on Bali, known for its surf and rice-paddy landscapes, surged 15 percent last year, the most among comparable destinations tracked by broker Knight Frank LLP.
The cost of villas on the Spanish island of Ibiza climbed 5 percent, while they slid 8 percent in Italy’s autonomous region of Sardinia, the report said.
Photo: EPA
Bali’s gains are set to continue as the Indonesian government begins to discuss this week revising rules to allow foreigners to directly own luxury apartments on the archipelago, with hopes of implementing changes within two to three months.
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,” Ryan said from Kerobokan, an area north of Kuta District in Bali known for its surf and nightlife. “These buyers have plenty of money, but they are turned away by the leasehold property options, as they would prefer to be able to buy freehold.”
Foreigners can get around the ban against owning real estate in Indonesia by using local citizens as proxies or by structuring the purchase as a long-term lease.
The government is to coordinate with Indonesian immigration and tax offices to draft the revisions, Indonesian Coordinating Minister of Economic Affairs Sofyan Djalil said on Thursday last week.
He cited Malaysia as an example, where foreigners can directly own landed property with approval from the state authority.
“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 Christine Li (李敏雯), director of research for Singapore at property broker Cushman & Wakefield. “Indonesia is still one of the biggest ASEAN markets in terms of population, in terms of land size, so there’s definitely a lot of room to grow.”
Property prices in Jakarta, about an hour’s flight from Singapore, increased 11 percent in March from a year earlier, Knight Frank data show.
That was the biggest gain in Asia after Bengaluru in India, where real-estate costs rose 13.6 percent.
The Indonesian government’s meeting this week is to discuss conditions governing real-estate purchases by non-Indonesians, including size restrictions, Djalil said.
Under the proposed amendments, foreigners will only be allowed to buy luxury apartments and no landed property.
Previously, Setyo Maharso, a member of Indonesian President Joko Widodo’s campaign team, said the government would allow foreigners to buy property of at least 200m2 and worth a minimum of 2.5 billion rupiah (US$185,000).
The revision “will lend support and perhaps counterbalance the slowdown in economic conditions,” said Chua Yang Liang (蔡炎亮), head of research for Southeast Asia at real-estate broker Jones Lang LaSalle Inc. “Providing clarity, real-estate transparency and clarity of policies is important in any transaction, so this will probably lift demand if it makes it clearer.”
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