1-7-2024 (JAKARTA) Bali, the Indonesian holiday hotspot renowned for its idyllic beaches and vibrant culture, is witnessing a surge of interest from Asian investors in its residential property market. As the island’s tourism industry rebounds and digital nomadism gains traction, rental yields in Bali have become increasingly attractive, drawing the attention of buyers from high-cost markets such as Hong Kong and Singapore.
While short-term rental incomes on the island have yet to fully recover to pre-pandemic levels, data from AirDNA, a leading tracker of vacation rental performance, reveals promising signs. In 2022, the revenue per available night rose by 8 percent to 1.9 million Indonesian rupiah (approximately US$118), while the occupancy rate reached an impressive 56 percent, a 2 percentage point increase compared to the pre-COVID-19 era.
Investors from Hong Kong and Singapore, where rental yields typically linger in the low single digits, are particularly intrigued by the opportunities presented by Bali’s property market. “Both places are similar in that they’re very high-ticket, low-yield markets, whereas Bali is low-ticket, high-yield,” explains James Hartshorn, CEO and co-founder of Palm Developments, a Hong Kong-based developer with a growing portfolio in Bali.
According to Hartshorn, affluent buyers are increasingly drawn to the southern region of the island, particularly the arid Bukit peninsula, where properties are yielding an impressive 15 to 18 percent annually.
The market’s buoyancy can be attributed to the influx of international tourists after Indonesia scrapped its pandemic travel restrictions and eased visa rules in 2022. In April alone, Bali welcomed 503,194 foreign visitors, representing a 7 percent increase from March and a remarkable 22 percent surge compared to the same period last year, as per official data.
Furthermore, Bali’s allure extends beyond its tourism appeal, attracting domestic migrants drawn to the region’s infrastructure and burgeoning tech scene. Widya Lestaluhu, the head of the Hong Kong office at Benham & Reeves, a London-based property agency, notes, “People tend to forget that Bali is just a small part of Indonesia, which has the fourth-largest population in the world. The local migration to Bali can prop up the island’s rental yields and support capital growth.”
John Truong, a 38-year-old British national working in finance in Hong Kong, is among those who have seized the opportunity to tap into Bali’s higher investment returns. Last September, he purchased a villa in the US$200,000 to US$250,000 range, lured by the prospect of returns on investment ranging from 15 to 20 percent at the time, compared to just 2 percent in Hong Kong, 4 to 6 percent in Malaysia and Vietnam, and 8 percent in Thailand.
Truong, who paid the developer before construction began, aims to visit the island only twice a year, as his properties are “predominantly aimed at return rather than personal usage.” He emphasizes his long-term investment horizon, stating, “I have invested with a long-term view to hold for the next 20 to 30 years, and the only reason I would potentially sell out of the property is if I needed the cash on an emergency basis.”
However, investing in Bali property as a foreigner comes with certain limitations. While Indonesian citizens enjoy freehold ownership of both the property and the land it is built on, foreign owners can only lease the property for a specified period, with the option to extend. Alternatively, they can establish a local company and obtain a freehold for a maximum of around 80 years.
Foreign property owners also face higher tax rates than Indonesian citizens. Truong reveals that he pays an income tax of 20 percent of the lease value, whereas for local tax residents, the rate is only 10 percent. “Non-domiciled tax is quite punitive in Bali, but it is also true for most of Asia where properties are affordable with a good return profile,” he acknowledges.
Despite these constraints, Bali’s property market continues to gain momentum, led by hospitality-related developments. According to a report published in March by consultancies C9 Hotelworks and Horwath HTL, the segment grew by an impressive 184 percent last year, adding 1,816 units across 21 projects.
The report highlights a shift in investor focus towards value and performance in the post-pandemic era, with new projects increasingly built by smaller developers offering managed and affordable residences catering to investors seeking high rental yields. Entry-level properties start at around US$130,000, indicating the market’s accessibility and potential for sustained growth.
