Bali Property Trends: Leasehold Investments

Bali property for sale

 

Bali property for sale
Image by Bernard Hermant on Unsplash.

Spotting trends is an important part of what real estate agents are supposed to do and we think we’ve got a real interesting one breaking ground right now.

It’s about buyer patterns. Hardly earth shaking news, I know. After all, buyer patterns across many business are constantly shifting as consumers become more sophisticated and knowledgeable and discerning. And seeing these patterns are what savvy businesses tend to do.

Here’s what we’re noticing – Leasehold property is becoming a very attractive option for Indonesian investors.

That’s it?

Yep, that’s it!

To really appreciate what this means and what the implications are, you need to understand the context of what and where and how because we’re talking real estate in Bali, which has for many years been a very predictable animal; a complicated one but some would say predictable nevertheless.

The historical (and typical) breakdown of buyers used to be simple: Indonesian investors preferred freehold titles, while foreigners preferred leasehold, not necessarily out of choice but simply because of constitutional legalities.

Of course there are those foreigners who see greater security in the name ‘freehold’ and we can understand that, but there are some important do’s and don’ts you should become familiar with if you have an interest in property ownership in Indonesia, especially how this relates to real estate in Bali and your nationality. You can read about them here, but the bottom line is that only Indonesian’s can legally own freehold titles in Indonesia. It’s that simple.

It makes sense that freehold is still the preferred title for most. However, there’s a growing movement that’s young, savvy, business oriented and entrepreneurial and most importantly it’s very Indonesian.

They’re well educated, they have inspiration and they’re crunching the numbers to find some really decent margins, even on leases well under twenty years; the sorts of leases that have been notoriously difficult to sell in the past and ones that not that long ago everyone, foreigners and Indonesians alike, would have been avoiding like the proverbial plague.

These are the guys and girls at the sharp end who are now actively searching for leasehold options, especially in tourism rich areas like Seminyak, Petitenget and Batu Belig. These trend setters see opportunities in commercial properties, particularly restaurants, shops, boutique resorts, middle-of-the-road hotels and holiday homes. They’re much more interested in exploring the right kind of deals on the right kind of property investments in Bali that produce the right kind of returns than they were just five years ago and they’re finding some of the best of those deals can be found with leaseholds.

It’s no secret that the hottest spots in town (between Seminyak and Batu Belig) are attracting domestic and foreign tourists like super magnets. Their business potential is beyond huge. Even short-term, they have the power of rocket fuel on a drag strip. As if to prove the point, many even offer Trip Advisor reviews, forward bookings from a loyal fan base and fantastic ROIs.

Kind of begs the question ‘why sell if business is so good?

And it’s a good question.

A simple answer is that many leases are foreign owned and they’re becoming prohibitively expensive to renew. Greedy owners aren’t happy with inflation related price increases and don’t care about pegging to the price of gold or rice or how good the foreign tenant has been over the years. They have become seduced by the green-horned-money-toad and their brains are soggy with dreams of things they think they need.

They’re demanding three, four even five times more than market value because in their eyes that’s what the land or villa or business should be worth.  It’s not by the way. Most people would agree that value is determined by how much people are prepared to pay for something not how much you perceive it’s worth.

The result of this is that many leases aren’t being renewed. What’s left of them are being sold instead while there’s still something worth selling. It’s time to cash in while you can.

In the old days leaseholds would be sold to other foreigners with fresh ideas, enthusiasm and inflated bank accounts ready to extend and bear the over-pricing. But not now. Now it’s the savvy Indonesians who are seeing the opportunities and they’re picking up opportunities all over the place.

They are inspired and inspiring. They are a reflection of the enormous potential Indonesia has with Indonesians and we’re delighted to see them create this exciting trend.

That’s not to say freehold is on the way out. Far from it. But there are different motivations and expectations to buying a freehold property, which we can deal with at a later date.

If you’d like more information on what property investments are available in Bali (both freehold and leasehold) drop us an email at hello@sevenstonesindonesia.com We’d love to help you find a great opportunity. If you’ve got an asset you’d like to sell, drop us an email too. We might just hook you up with a rising Indonesian entrepreneur who can see the potential in what you’ve got and help create a win-win for everyone.

 

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Andrzej Barski

Director of Seven Stones Indonesia

Andrzej is Co-owner/ Founder and Director of Seven Stones Indonesia. He was born in the UK to Polish parents and has been living in Indonesia for more than 33-years. He is a skilled writer, trainer and marketer with a deep understanding of Indonesia and its many cultures after spending many years travelling across the archipelago from North Sumatra to Irian Jaya.

His experience covers Marketing, Branding, Advertising, Publishing, Real Estate and Training for 5-Star Hotels and Resorts in Bali and Jakarta, which has given him a passion for the customer experience. He’s a published author and a regular contributor to local and regional publications. His interests include conservation, eco-conscious initiatives, spirituality and motorcycles. Andrzej speaks English and Indonesian.

Terje H. Nilsen

Director of Seven Stones Indonesia

Terje is from Norway and has been living in Indonesia for over 20-years. He first came to Indonesia as a child and after earning his degree in Business Administration from the University of Agder in Norway, he moved to Indonesia in 1993, where he has worked in leading positions in education and the fitness/ wellness industries all over Indonesia including Jakarta, Banjarmasin, Medan and Bali.

He was Co-owner and CEO of the Paradise Property Group for 10-years and led the company to great success. He is now Co-owner/ Founder and Director of Seven Stones Indonesia offering market entry services for foreign investors, legal advice, sourcing of investments and in particular real estate investments. He has a soft spot for eco-friendly and socially sustainable projects and investments, while his personal business strengths are in property law, tourism trends, macroeconomics, Indonesian government and regulations. His personal interests are in sport, adventure, history and spiritual experiences.

Terje’s leadership, drive and knowledge are recognised across many industries and his unrivalled network of high level contacts in government and business spans the globe. He believes you do good and do well but always in that order. Terje speaks English, Indonesian and Norwegian.

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Ridwan Jasin Zachrie

CFO of Seven Stones Indonesia, Jakarta

Ridwan is one of Indonesia’s top executives with a long and illustrious career in the financial world. He holds several professional certifications including being a Certified Business Valuer (CBV) issued by the Australian Academy of Finance and Management; Broker-Dealer Representative (WPPE); and The Directorship Certification for Directors and Commissioners, issued by the Indonesian Institute of Commissioners and Directors.

His experience includes being the Managing Director at one of the top investment banking groups in the region, the Recapital Group, the CFO at State-owned enterprises in fishery industry and the CEO at Tanri Abeng & Son Holding. He’s also been an Independent Commissioner in several Financial Service companies and on the Audit and Risk Committee at Bank BTPN Tbk, Berau Coal Energy Tbk, Aetra Air Jakarta as well as working for Citibank, Bank Mandiri and HSBC. His last position was as CFO at PT Citra Putra Mandiri – OSO Group.

Ridwan has won a number of prestigious awards including the Best CFO Awards 2019 (Institute of Certified Management Accountant Australia-Indonesia); Asia Pacific Young Business Leader awarded by Asia 21 Network New York USA (Tokyo 2008); UK Alumni Business Awards 2008 awarded by the British Council; and The Most Inspiring Human Resources Practitioners’ version of Human Capital Magazine 2010.

He’s a member of the Board of Trustees of the Alumni Association of the Faculty of Law, Trisakti University, Co-Founder of the Paramadina Public Policy Institute and actively writes books, publications and articles in the mass media. He co-authored “Korupsi Mengorupsi Indonesia” in 2009, which helps those with an interest in understanding governance in Indonesia and the critical issue of corruption. Ridwan speaks Indonesian and English.

Per Fredrik Ecker

Managing Director of Seven Stones Indonesia, Jakarta

Per is the Managing Director of the Seven Stones Indonesia (SSI) Jakarta office and has more than 25-years’ experience in Indonesia, China, and Western Europe. He previously worked in senior management positions with Q-Free ASA, Siemens AG, and other companies in the telecom sector. Over the last six years, he has been the Chairman of the Indonesia-Norway Business Council (INBC) and recently become elected to be on the board of EuroCham Indonesia.

His most recent experience is within Intelligent Transport Solutions (ITS), Telecom, and other sectors within the Indonesian market. He is today through his position in SSI and by representing Norway Connect, promoting Nordic and European companies that would like to explore business opportunities in the Indonesian market. He’s also playing an active role to help create the Nordic House concept in Jakarta that will provide an excellent platform for Nordic companies entering Indonesia, where they’ll find a community that can offer support with trusted information and affordable services to enter this market.