Bali Expat Forum - Bali Travel Forum

For those poor souls (like me) that follow such things, an excerpt from an interesting article out of the Seoul Times:

Property price changes in Indonesia and Malaysia remain unimpressive. Although the national house price index in Indonesia was up 5.2% in nominal terms to end Q-3 2007, the index actually dipped by 1.2% in when adjusted to inflation. In Malaysia, the house price index rose 3.2% (1.7% in real terms) to Q2-2007 from a year earlier.

For those sturdy enough (or bored with their families this Xmas holiday) the entire article can be seen here:

http://theseoultimes.com/ST/?url=/ST/db ... p?idx=6061

I would be interested to hear from those living there if this reflects their experiences.

I think these markets are value markets, though with limitations on foreign control of land in Indonesia, it's difficult to know when the value will be realized. I'm only certain that one day it will, and that the pressure to allow further foreign control of land will only grow..

ct

Time to buy another house.

First, sell the one(s) in England?!?

BaliLife I think that is an excellent point and I took a while to think about it (or maybe I'm just slow) and it seems that you have hit the nail on its proverbial head. When (not if) the powers that be in Indo decide to allow a more rational foreign land ownership policy the price of land will skyrocket. Just from my short exposure to this forum and several others like it I've gotten a feel for the hunger there is out there to own a chunk of paradise.

So really it's "buy now and takes your chances" and get it dangerous but cheap or buy later and pay a premium for the "security" which, in fact, may not really exist in any developing country (notice, I didn't say 3rd world country).

Don't you just love capitalism?

Markit wrote:BaliLife I think that is an excellent point and I took a while to think about it (or maybe I'm just slow) and it seems that you have hit the nail on its proverbial head. When (not if) the powers that be in Indo decide to allow a more rational foreign land ownership policy the price of land will skyrocket. Just from my short exposure to this forum and several others like it I've gotten a feel for the hunger there is out there to own a chunk of paradise.

So really it's "buy now and takes your chances" and get it dangerous but cheap or buy later and pay a premium for the "security" which, in fact, may not really exist in any developing country (notice, I didn't say 3rd world country).

Don't you just love capitalism?

Well I for one fervently hope that the Indonesian government do NOT change their policy for foreign land ownership.

How in the heck do you think Indonesians can ever hope to own their own land (yes Markit it is a dream that everyone has, not just Westerners) if the price of land skyrockets because non-Indonesians want a 'chunk of paradise'. To me it sounds like a few wealthy foreigners get their greedy wishes while millions miss out.

Think about the people who's country it is for a bit. Here's an example for you. My son-in-law needs to live near the tourist areas as that is where he can find work. His wife's village is bang smack in the middle of the tourist area - land prices are such that no-one who doesn't already own land can ever afford to own their own 4 are. Why? because foreigners are willing to pay more than a lifetime's income for the block of land, and do.

If it became easier for foreigners to own land, prices would go up on land even further out from the tourist hubs, making it even harder for locals to own their own land. The futher away they have to live, the more it costs them to get to work, the less chance they will ever get the money together to buy land. Not forgetting that Indonesians rarely have access to a mortgage - they have to actually save up the money before they can buy.

If you want to live in Indonesia, fine. Personally I don't think any Indonesian should sell their land to a foreigner. Lease it if you must, but leases finish and then need to be renegotiated (bringing income to the family that owns the land) or the land is returned to the owner/s.

Freo,
I understand your argument against foreign ownership and sympathize with it - as far as it goes. The facts are that the situation the way you describe it is not limited to just Bali, or just Indonesia. or just the developing world or just "Paradise, or just anywhere!

Your description of the difficulties for people trying to get on the property ladder fits as well to people earning $75,000 in London as they do for your son-in-law. Economics will save us all - let me tell you a story:

My parents moved to England in 1971 and bought a house for £4,500 (an accountant earned between £6 and 8K/year just for comparisons sake). At that time in the UK people there all rented colour tvs and videos - don't ask why, they just did. When my father died in 1987 I noticed that they still had the original TV and Video that they had rented back in 71, so with nothing better to do I sat down and calculated that they had paid £6,800 for them over the full term of the rental and that the mortgage on the house still had some to go. What's my point?

Well, the lesson I took from it was that looking back mountains can look like molehills and some molehills, you don't even notice, can be turn into a real bitch to climb.

Increases in house/land prices always bring equal increases in buying power to compensate them - it just takes time, sometimes a lot, sometimes none.

Over the time period I spoke of my parents house appreciated in value to the tune of £85,000 and, needless to say, I called the rental company and told them to come and pick their shitty old TV gear up!

And yes, people can still buy houses and have families and do all the things that normal people do because earnings have been increasing right along side of house/land prices - and accountant today earns about 60,000 a year and that's here in the sticks, in London a lot more, but what a shitty job!

Sorry if I've bored you but it's 1:30 am here and not a creature is stirring, not even a mouse.

Sorry the relationship might be a bit confusing in the above post.

The example I gave was for my step-son Heri (my husband's son).

I had started to write about my step-son-in-law (my step-daughter's husband) but the story was long-winded so gave a different example but forgot to change who it was I was writing about. Getting old

Markit, you miss the point. Yes it is hard for anyone starting out to get on the real estate ladder in any country, here in Western Australia it is getting very very difficult due to the mining boom pushing up housing prices to the ridiculous.

So imagine if you take the current situation in England, and then the government changes the laws such that wealthy Chinese and Arabs can come in and buy buy buy, pushing the price of housing to a level that no English citizen (other than a very select few extremely wealthy) can ever afford to buy a home?

Let's say a 10 fold rise in house prices in your suburb occurs, where you are renting. Your rent go up, and everything goes up as it is indexed to the land values. The local stores cater for the new wealthy owners and you can no longer afford to live there. You now have to move further out from the area to somewhere more affordable, but now have to commute for hours each day to work and pay 30% of your income on transport cost.

That is what you were advocating in your post. Open up land sales to foreigners in Indonesia. Invest now so you can take advantage of the skyrocketing prices later. The impact on locals would be similar to what I've described above. This sort of scenario has already occurred in parts of Indonesia.

Your description perfectly fits the London market over the last 10 -15 years. Exactly as you say! It's getting so bad that all those rich people living there ( a garage sold for £250,000 last year!) are getting a bit worried about it all because they don't have any nurses, policemen, garbage collectors, teachers, ie "normal people" that can afford to live near enough to them to do their jobs. What value wealth if you can't get your garbage picked up, your children taught, your streets guarded?

The only difference is that the government didn't have to change any laws - it's always been allowed for foreigners to buy there. The rise in wealth for the general population has led to the highest and longest increase in standards of living in this country in recorded history! I mean they all have inside toilets now - wow!

Soon all the Australians will want to come back.

Look at Thailand for a good comparison. Bali would change but that's progress.

I agree with Freogirl – and as I have stated when I first joined the forum, I wish that the law regarding land ownership for foreigners will not change in Indonesia (Bali) at least until the buying capacity and income of the majority of local people are on equal footing as the people from the developed countries (nice to dream about it). Well, we all know this is hardly going to be a short term process considering the majority of people are still getting less than Rp 500,000 a month. Markit, how do you expect locals earning as much to compete with would be foreign buyers who are earning that amount in an hour or two? The Balinese would be (in my humble opinion) at the worst disadvantage!!

But then again, if the minimum wage in Bali would be as high as that in developed countries, there wouldn’t be many incentives for people to come, to build and to live in Bali – or would there be???

I personally would like to hear some reasons why people would like to live in Bali and what actually make people want to go through the daunting? high risk process of owning properties in Bali and not to mention the visa requirements. And would people still go through with retiring or living in Bali if the wages are not as cheap as it is now.

Hi Kadek,

The only ways that the Indonesian people will be able to reach buying parity with Westerners is either to follow China's route - which isn't possible because you just don't have the numbers or to stimulate inward investment in the form of land sales. As much as I hated Ronald Regan and all he stood for "trickle-down" does work. What I mean is that when it is finally allowed people on Bali will sell their land, as they already do, but for a realistic market price. Not 50 - 100 million rupiahs for beach-side property.

What you ask is how can the Balinese win parity with Westerners? The answer is: compete with them on a level playing field and utilize the market to generate more wealth for all the land owners in Bali, both western and home-grown.

Unfortunately keeping the laws as they are won't help Indonesians - from a macro economic perspective. Yes, on the micro level when you look at individual stories there are people who will suffer as a result of opening up the laws on foreign land ownership. I for one try to keep the sour taste of individuals stories out of my reasoning. The truth is that policy needs to be derived in the interests of the masses - overall if you look at the growth in China, that growth says that as a whole the standard of living has increased in China. Now, at a closer look, the leftists (which I'm one of) and the socialists (which strangely enough I'm not one of) will say, "oh yes but the distribution of wealth is so distorded, you can't really say that chinese have benifited.. so many farmers have been forced from their land to move to the cities..".. yes that may be true from a 200 foot perspective, but unfortunately government policy really needs to say, "too bad, overall the nation is booming and we will continue to set policy from a 15,000 foot view"..

now, i'm not trying to compare indonesia to china.. and in fact china doesn't allow unconditional ownership of land by foreigners either.. i remember being at canning college at a year or so after the financial crisis and my economics lecturer was saying how the rupiah's plunge had really hit indonesia hard, especially those abroad.. he started explaining some of the things the australian government was doing to help indonesia cope with the crisis.. i raised my hand and asked why didn't australia just start buying up all of indonesia's tangible assets from underneath them.. he said there'd be a question of ethics involved.. i thought to myself, "ethics? what's ethically wrong with exploiting an opportunity in a fair trade that both buyer and seller are in agreement to?".. anyhow of course, some time later i realized it wouldn't be so simple.. i.e. if there was such a large sudden buying of the rupiah, then all of a sudden it would skyrocket and those assets wouldn't look so cheap.. but in essence, it would help indo from a macro perspective..

let's look at a scenario where indo allows foreign ownership of land..

1. Land prices skyrocket
2. The rupiah skyrockets because to buy land in indonesia, most transactions will at some point need to be converted back to rupiah
3. A strong rupiah combats the rampant inflation burdening the country
4. Overall standard of living increases from increase in foreign investment

anyhow, there's always the good and the bad.. like i said, looking at things too close to the ground is something i think government has to avoid.. decisions need to be made for the masses and the masses are represented in macro economic data..

ct

I think that changing the rules for landownership will not change much for the average Balinese. Most land worth while is already owned by non-Balinese Indonesian people, like the family of the former president. The land I have “bought” in the North of Bali was owned by a family from Maduro and the neighbouring land is owned by Indonesians living in Europe.

Maybe for the Balinese themselves the profit from investment, employment and increasing spending on the Island will outweigh the loss of ownership of the land.

It is a difficult one to call. Most who wish to buy want a lifestyle they cannot afford in Europe, America etc. There is nothing wrong in this per se. On the minus side, well it has been well disussed above. On the plus side theu do bring money into the local economy and give jobs etc as well.
The situation is not new and as happend throughout the UK where those that have money have bought holiday homes etc whereas local people have not been able to buy because the prices have been driven up.

I do not have an answer but one thing to bear in mind is that it will not stop whilst there is a demand and I have yet to see the situation where locals per se have ever caught up.

This is a very subjective topic and just looking at it in the most simple way Jimbo has most of it covered the explotation/speculation of and by some is balanced somewhat by the genuine bali lover who seeks to co-exist and contribute to lives of many in their banjar . I am sure there will be many who read this that see this as blind idealism but far from looking at this in a bland $ value economist point of view there is so much more to life . The island of Bali has been exploited by so many over the years that no matter what happens foriegn ownership or not they will adapt in their positive manner and make the most of it . To all on the Forum i would like to wish all a very happy New year Selamat Tahun Baru dan salam untuk Semua.