Prices of prime residential properties in Bali jumped 15 percent in 2014 – the highest among comparable destinations monitored by Knight Frank LLP.
The increase in prices are expected to continue as the Indonesian government starts discussions on amending the rules to allow foreigners to own luxury apartments within the archipelago this week, with hopes to implement the revisions in two to three months, according to media reports.
Bali Realty owner Nathan Ryan expects to see interest from Singapore and China once the revisions are made.
“Asian buyers are no doubt a sleeping giant for Indonesia,” said Ryan as cited by the media. “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.”
To draft the revisions, the government will coordinate with Indonesian immigration and tax offices, said Indonesian Coordinating Minister of Economic Affairs Sofyan Djalil last week.
He pointed to Malaysia as an example where foreigners are allowed to directly own landed properties with approval from the state.
“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, research director for Singapore at 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.”
Djalil said the Indonesian government will discuss the conditions relating to real-estate purchases by foreigners as well as the size restrictions.
Under the proposed changes, foreigners will be allowed to acquire luxury apartments but not landed properties.
Chua Yang Liang, Southeast Asia research head at Jones Lang LaSalle Inc, noted that the revision “will lend support and perhaps counterbalance the slowdown in economic conditions.”
“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.”