[JAKARTA] The world's hottest island property market is about to get even hotter.
Prime residential prices on Bali, known for its surf and rice-paddy landscapes, surged 15 per cent last year, the most among comparable destinations tracked by broker Knight Frank LLP. The cost of villas on the Spanish island of Ibiza climbed 5 per cent and slid 8 per cent in Italy's autonomous region of Sardinia, the report said.
Bali's gains are set to continue as the Indonesian government begins to discuss this week revising rules to allow foreigners to directly own luxury apartments in the archipelago, with hopes of implementing changes within two to three months. Nathan Ryan, owner of property brokerage Bali Realty, expects interest from China and Singapore once the revisions are made.
"Asian buyers are no doubt a sleeping giant for Indonesia," Mr Ryan said from Kerobokan, an area north of Kuta, known for its surf and nightlife. "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." Currently, foreigners can get around the ban against owning real estate in Indonesia by using local citizens as proxies or by structuring the purchase as a long-term lease.
Singapore Interest The government will coordinate with the immigration and tax offices to draft the revisions, Sofyan Djalil, coordinating minister for economic affairs, said July 23. He cites Malaysia as an example, where foreigners can directly own landed property with approval from the state authority.
"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, director of research for Singapore at property broker 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." Property prices in the Indonesian capital Jakarta, about an hour's flight from Singapore, increased 11 per cent in March from a year earlier, Knight Frank data show. That's the biggest gain in Asia after Bengaluru in India, where real estate costs rose 13.6 per cent.
The Indonesian government's meeting this week will discuss conditions governing real estate purchases by non-Indonesians, including size restrictions, Mr Djalil said.
Under the proposed amendments, foreigners will only be allowed to buy luxury apartments and no landed property.
Previously, Setyo Maharso, a member of President Joko Widodo's campaign team, said the government will allow foreigners to buy property of at least 200 square meters (2,153 square feet) and worth a minimum of 2.5 billion rupiah (S$253,079).
The revision "will lend support and perhaps counterbalance the slowdown in economic conditions," said Chua Yang Liang, head of research for Southeast Asia at real estate broker Jones Lang LaSalle Inc. "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."