Bali’s Villa Property Market in Shambles

The Nikkei Asia Review has published a review of the crashed private villa market in Bali precipitated by the mass exodus of expatriates fleeing the Island in fear of the COVID-19 Pandemic.

The absence of foreign visitors in Bali has resulted in bargains such as Kadek Wisana’s 3-bedroom luxury villa overlooking a river valley in central Bali, including a private pool, that in better times sold out quickly at US$100 a night.

Now, with the Pandemic in full swing, Wisana tries to offers the same accommodation at a rental of US$400 a month with little or no takers among the few expatriates still living in Bali.

Wisana’s story echoes the experience of many villa owners with properties remaining empty despite offering substantial discounts on par or much less than rooms in a three-star hotel. 

Like hotels on the Island, villas have sent their staff home without pay. With many left with minimum cash flows that are insufficient even to pay utilities and basic upkeep.

A 2019 report by estimated 4,000 luxury villas on the Island were renting at an average of US$220 per night. Those prices, however, predate the Pandemic and are typically now discounted by as much as 50-85% in what has become very much a buyer’s market.

Many expatriate real-estate agents have deserted Bali or gone into self-isolation to wait for better economic times to return. As recently as last year, these agents were busy touting properties promising double-digit yields and capital gain that were multipliers of the original investment price.

Because of the current economic downturn, rental bargains abound in Bali. Unfortunately, candidate renters are few and far between. As Nikkei Asia Review highlighted, 4-bedroom fully furnished and staffed beachfront villas in Seminyak are on offer at $1,100 per month with a two-story townhouse in Ubud listed at just $500 a month. A year ago, before the Pandemic hit, both properties were listed and renting at three times their current price.

A lack of renters has caused some homeowners to offer units for free to house-sitters to maintain their claim on the property.

The article quotes Terje Nilsen of Seven Stones Indonesia – a property consultancy focused on foreign investors, saying: “There are very few foreigners left, perhaps only a few thousand Australians and perhaps the same number of Europeans. And it’s not just Bali’s rental market that is being hammered; the COVID-19 crisis is also hitting property values just as hard.”

Another agent quoted by Nikkei, Matthew Georgeson, who has been dealing property in Bali since 2005, says Bali was once one of the best-performing real estate markets on the globe. Describing a real estate market that has come to an abrupt end, Georgeson said: “On the main street of [the west coast surfing mecca of] Canggu, land values have increased 40 to 50 times in the last ten years.”

The rental market has disappeared in Bali with little likelihood of a quick return in the face of Australian travel bans and the lingering COVID-19 Pandemic.

Some Bali developers try to put the best light on the current situation, blithely describing the real estate market as being “in hibernation.” Some local banks are extending mortgage holidays to Indonesian investors. While well-heeled foreign developers have little choice but to sit back and wait for better days ahead.

Most experts agree that when the tourism market restarts, it will do so gradually with customers initially coming from regional markets in Asia. Those banking on a resurgence of Chinese outbound travel in combination with other Asian source markets may or may not have factored what effect higher airfares and an incipient global recession will have on regional economic recovery.

Supply seems sure to outpace demands for villas in Bali for some time to come, suppressing both property and rental values.

Despite bold steps to curb new infections, Indonesia has yet to arrive at a downward slope of new infection rates that would signal the Island has turned the corner on the current crisis. Bali has recently recorded new record highs in new daily COVID-19 cases.

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