BALI: Developers in Bali are building apartments in anticipation of a post-Covid tourism boom projected to send demand for self-contained and long-term accommodations skyrocketing.
Despite the tropical getaway having been officially closed to international tourists during an 18-month stretch of the coronavirus pandemic, Bali has consistently ranked high as a desired destination among travel surveys and topped Tripadvisor’s 2021 list of the world’s most popular.
Construction of villas has already seen a surge, with interest now also turning to apartments.
A 2020 joint study by research companies STR and AirDNA of 27 international markets found that while demand for both hotels and short-term rentals was badly affected by the coronavirus pandemic, short-term units weathered the storm better because of preferences for larger living spaces and the need for social distancing.
The research also found that length of stay increased 58% during the pandemic.
“In the post-pandemic world, hotel rooms will be a commodity no one will want,” says Richard Menser of PBM Architects in Bali, which has designed dozens of resorts in Southeast Asia.
Menser also believes non-hotel units will also prove attractive to investors as they mitigate much of the inherent risk of investing in property in Indonesia.
Problems that have been cited over the years include difficulties involving land registration that can be exacerbated in partly agrarian areas like Bali, where land is often subject to communal ownership and efforts to issue official land certificates have sometimes led to conflict.
Menser was recently commissioned to design Finns Lifestyle Village, a US$200 million development on a 40,000sqm site in the west coast surfing hub of Canggu.
Scheduled for completion in approximately two years, it will have 206 luxury apartments, an aquatic centre with waterslides, facilities for tennis, basketball and netball, a business centre with Bloomberg terminals and a trading room.
In addition, there will be a shopping centre, medical centre, park and helipad.
Prices, sales tax included, start at US$375,000 for a one-bedroom unit and go as high as US$1,218,000 for a three-bedroom apartment with a private rooftop pool.
The units are being sold off the plan using a leasehold model, payable until 2055 with the option to extend for 80 years.
However, leaseholds – traditionally the only property ownership model available to foreigners in Indonesia – do not sit well with many investors and deter them from otherwise buying their own piece of paradise in Bali.
But following the introduction in November 2020 of Indonesia’s controversial omnibus law for job creation meant to cut red tape and stimulate the economy, foreigners can now buy units freehold and enjoy permanent ownership and resale rights.
It has given developers in Bali confidence to fast-track projects like Secana Beachtown, a planned development of 60 townhouses and 30 loft apartments in Canggu embedded with smart technology, three restaurants, a cinema, squash court and all the amenities of a five-star hotel.
The law, however, has been thrown into uncertainty after Indonesia’s Constitutional Court on Nov 25 last year ordered the government to provide stronger legal ground for it, saying the current framework will be declared “permanently unconstitutional” if necessary changes are not made within the next two years. It remains in force for the time being.
Another project is The Tamora, a series of four-story buildings with 19 ground-floor retail spaces, generous green areas, terraces with ocean views and 126 studio apartments priced, including sales tax, from US$140,000 to US$350,000.
Mark Ching, Tamora Group director, says the project was “basically built because of the omnibus law”.
Slated for completion this year, 60% of the units have already been sold – one in 10 to foreign investors.
“They are a mixed bag: Australians, Chinese, Americans, but generally expats already living in Bali,” says Ching, adding that the percentage of foreign owners is expected to increase significantly when international tourists eventually return in large numbers.
Until then, the developer is relying on a surge in domestic tourists and investors to carry the project to fruition.
“The reason we are doing well right now is because of domestic travellers who couldn’t go overseas and came to Bali instead,” Ching says. “And that has pushed prices during the pandemic.”
A real estate agent from India, Pravin Rana, principal at Ray White Canggu, believes all three new projects will meet their sales targets. “Multilevel buildings have traditionally been discouraged in Bali so there’s a huge gap in the market for apartments in Bali,” he says.
“But investors have to remember this is not Singapore. The law is different when it comes to suing someone for breach of contract and there’s no certified builders association. I’ve heard plenty of horror stories. I would never buy an off-plan unit in Bali.”
But John Spence, the British owner of Karma Group who began his journey as a property developer in Bali in 2003 with Karma Jimbaran – a gated community with 40 villas at Jimbaran Bay in the south of the island – says investors have little choice.
“Off-plan is basically the only way for people to buy the inventory they want because it is not a city with hundreds of apartment buildings to choose from,” he said.
“There have been a very limited number of prime developments until now and there’s not much of a secondary market. You can build your own villa but that is not something I would recommend unless you live here and have a lot of time on your hands.”
In 2006, Spence bought a large parcel of clifftop land with 180° Indian Ocean views further south in the Uluwatu area.
Now, with a slew of luxury developments there, including a sea cliff beach club boasting a pool venue with a capacity of 3,000 people, the heights of Uluwatu have become known as Bali’s “billionaire’s row”.
Karma Kandara, Spence’s second Bali property, is a whitewashed five-star resort also designed by Menser of PBM Architects with clifftop pools, winding coral alleyways and 77 luxury villas that have fetched prices of up to US$1 million.
He is now building another project on the site with 10 villas and 30 units offered as leaseholds. Spence will not share sales data but claims “most of it” has already sold.
“When tourists start coming back to Bali, a lot of them are going to say to themselves, ‘I can work here remotely now so why don’t I get a comfortable place where I can stay six months a year and not worry about finding accommodation or paying steep premiums during the peak season,'” he said.
“Others will be saying, ‘I should get a place overseas’ in case their country goes into lockdown again, or the government increases taxes to pay for all the debt accumulated during the pandemic,” he added.
For these reasons, Spence says any quality apartment building in Bali – whether offered freehold or leasehold – will sell out before it’s built. “People will want to buy into the location and the lifestyle.”