Go east: Opportunities are expanding on the island of Bali and beyond

One of the fastest growing real estate regions within Indonesia in recent years has been east of Java – the residential, resort and hotel market on the island of Bali. Today, however, there are signs of a push even further afield – to islands in the south- and north-eastern parts of the country that have previously been off the international real estate radar. This expansion, driven by demographic and economic factors, has great promise, though it is also not without its risks, both in terms of overheating local economies and its potential environmental and social impact.

Holiday Land

According to real estate consultancy Knight Frank, in 2013 prices grew 22% in the luxury residential property market in Bali, the third-highest rate in the world after Jakarta and Auckland. The island’s capital, Denpasar, saw a 9.97% rise in residential prices of all kinds in the first quarter of 2013, according to Bank Indonesia figures. The areas of the island showing the highest growth have been those most popular with tourists – Kuta, Legian, Seminyak and Oberoi – while the more historically neglected north coast, and the Bukit Peninsula on the south side have also recently seen major developments. Most real estate investor interest in the island has been in the development of private villas, “condotels” (establishments that offer both hotel and private condo units), hotels and resorts.

Local Presence

Indonesian investors are quite active, particularly in land, hotel and resort development. Their presence is also strong given the ongoing difficulties foreigners have with obtaining clean land titles (see overview). The sector’s growth is not just being driven by foreign tourists either; Indonesians themselves are represented heavily amongst luxury property purchasers, with Credit Suisse estimating that there were 60,000 US-dollar millionaires in the country in 2011. The current number is likely far higher, with a villa in Bali on many of the wealthy’s wish lists. At the same time, in resorts, luxury villa complexes, high-end serviced apartments and condos in particular, branding with a global name is key to boosting yields, with Starwood’s W, Bvlgari, Banyan Tree and Alila some of the more recent arrivals. Upscale villas like these produce high occupancy rates and high returns for investors, with purchase prices still lower than similar properties in Thailand or – in a sign of today’s higher aspirations – Hawaii. “Prices of high-end property have more than doubled recently, inspiring investors to buy commercial, retail and residential property, thus creating an even higher demand for supporting infrastructure, construction materials, equipment, including skilled human resources such as engineers, architects and labourers,” Ronnie Tan, president director of Acset Indonusa, told OBG. This burst of development is not without its constraints, however. Infrastructure on the island, while receiving a boost ahead of the APEC conference in 2013, has sometimes failed to keep pace with real estate, while popular tourist areas are experiencing some congestion and a shortage of available land. Yet more tourists keep coming, with Statistics Indonesia figures for January 2014 showing arrivals at Ngurah Rai International Airport up 21.4% on January 2013 to 278,685, making the airport Indonesia’s busiest.

Further Afield

The real estate boom has pushed developments further out as well, with land prices up to $2000 per sq metre as far out from the main urban centres as Canggu by March 2014. Land prices in areas like Seminyak, meanwhile, tripled between 2011 and 2013, with a March 2013 report from realtor Elite Havens suggesting a 100-sq-metre plot in the area was worth around $275,000 at that time. Another recent trend with land has been for owners to retain long-term control by leasing rather than selling. This has not always been welcomed by developers, who naturally prefer freehold purchases. Nonetheless, with pressure on land so high, this remains very much a sellers’ market.

There are also concerns regarding the environmental and social impact this development is having on the island itself, as the very uniqueness of both represent major draws for people to live on Bali, as well as to visit. There has been a surge in the expatriate population too, with many native Balinese unable to afford the new property prices. In consequence, local authorities have attempted to encourage development outside of the main areas, declaring periodic moratoriums on further building in Denpasar and its environs. Not surprisingly, however, these moves have further squeezed supply, boosting prices.


One answer to this growing pressure on Bali may be development taking place nearby. The islands of Nusa Lembongan, Nusa Ceningan and Nusa Penida all lie off the crowded shores of Denpasar, some 12 km offshore and within reach via regular ferry service. These have seen development accelerate in recent times, particularly of high-end resorts and villa complexes. Further east, just across the Lombok Strait, lies Lombok, for many years touted to prospective tourists as the “next Bali”. Off Lombok’s coast there are also the three Gili Islands, which have seen a surge in visitor numbers in recent years. They too are now seeing more residential and resort real estate interest.

The opening of the new international airport has certainly boosted tourism numbers to Lombok in general, with luxury investments made in the expectation of this now on stream. Indeed, figures from Statistics Indonesia showed an astonishing 374% increase in arrival numbers at the airport in January 2014, yearon-year, albeit from a relatively low base: arrivals in January 2013 totalled just 1077, rising to 5105 in January 2014. Local press also reported resort-grade land prices on the main island of Lombok at around $150-250 per sq metre in March 2014, considerably lower than on Bali, with Senggigi and Tanjung two major centres for high-end developments.

It may be some time then before anywhere east of Bali reaches a comparative level of development in terms of real estate. One reason for this is the quality of infrastructure on such islands, with transport becoming less frequent and reliable once one crosses the Wallace Line. Additionally, telecoms, electricity and water supplies, the availability of skilled local labour and a range of other capacity constraints begin to heighten in this area. Government efforts to improve all of these are under way, however, with the Master Plan for Acceleration and Expansion of Indonesia's Economic Development targeting infrastructure investment.

Head North

One place where the real estate market is already taking off is to the north-east of Bali, in South Sulawesi. The provincial capital, Makassar, saw the highest annual increase in property prices in Indonesia in the first quarter of 2013, according to Bank Indonesia, at 15.6%. This had slowed by the last quarter but still remained at a strong 10.57%. The port city, home to 8% of Indonesia’s population, was historically a major regional centre for trade and commerce, a role it later lost in Dutch colonial times. Today, the locals hope that its strategic position will help restore the city’s former glory, with several major national Indonesian developers, like Lippo Group, Sinar Mas and Ciputra, and locals such as Kalla Group and Asindoindah Griyatama, beginning major residential and retail investments several years ago. These have now reached completion, while new infrastructure projects, like roads and communications, have also helped drive growth.

Many high-end hotels have sprung up in the last few years, with Indonesians the main visitors and users of new meetings, incentives, conferences and exhibitions spaces, like the Grand Clarion Hotel. Growth of Indonesia’s middle class outside of Jakarta is often cited as the main driver, along with urbanisation and economic expansion fuelled by Sulawesi’s commodities trade.


The heightened acquisitiveness of this wealthier population is exemplified by Makassar’s TransStudio, the only luxury shopping mall and theme park in eastern Indonesia. The mall is an international draw as well, attracting customers from as far away as Papua New Guinea in search of the closest Hugo Boss outlet. The boom shows no sign of abating in 2014. Lippo Karawaci, the group’s property developer, reported to TheJakarta Postin January 2014 that units in its Rp3.5trn ($350m) Bloomington St Moritz development in Makassar, which includes a hotel, luxury mall, apartments, a hospital, school, entertainment area and private members’ club, were 75% sold before the project had been completed. The project is set to include the tallest tower block in eastern Indonesia. In North Sulawesi too, the provincial capital, Manado, is also now seeing rising real estate prices. According to Bank Indonesia, the fourth quarter of 2013 saw a quarter-on-quarter rise of just 0.48%, but on a year-on-year basis, the figure was 23.23%, higher than that for Makassar. Manado’s growth is driven by similar factors as its southern neighbour, with economic expansion linked to commodities and commodity processing combining with population growth from urbanisation. Indonesia’s real estate market today is becoming much more than just a Jakarta and Bali story. Secondary cities and new tourism destinations are rising stars, with the eastern part of the country offering major growth prospects. Coordinating this with infrastructure development, while also preserving what makes such places attractive in the first place, will be key to taking expansion to the next stage.


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