The island of Bali is one of the most popular tourist destinations in the world due to its astonishing beaches and lush jungle forests. The demand for rental property on the island is high because millions of tourists visit Bali every year. Purchasing rental property on the island is an attractive investment option for this reason. However, you have to do some market research before investing in real estate in Bali. Below we discuss possible return on investment that you may have if you buy rental property in certain regions of Bali.
Bali tourism boom – a catalyst for demand for rental property
The tourist sector is recovering fast after the pandemic. Due to this fact, the rental property prices are rising. Last spring, the administration of the island said that it expected to see 4.5 million tourists visit Bali in 2023. The way things look now, however, the expectations are going to be exceeded.
According to the data available at the moment, 2.9 million foreign tourists visited Bali between January and July of 2023. The island administration as well as the Government of Indonesia are sure that the number of tourists will exceed expectations by the end of the year, given the figure quoted above. This is an important achievement indeed, because more than half of all foreign tourists visiting Indonesia come to Bali.
This is not the first time when the figures are better than the authorities had expected. In 2022, the island administration predicted that 1.5 million tourists would visit Bali. By the end of the year, however, the figure was 2.1 million.
The number of foreign tourists visiting Bali is still lower than it was before the pandemic. At that time, 6 million tourists visited Bali every year. The tourist sector is clearly recovering though. Local property owners and subjects of tourist business are itching for the Christmas holidays to come. This time of the year is the peak of the tourist season in Bali.
The ‘quality’ of tourists matters not less than their quantity does. Bali is quite happy about the quality of tourists. Wealthy Australians visiting the island outnumber other nationalities. Between January and July 2023, more than 625 thousand Australians visited Bali. The second largest number of tourists come from India – more than 230 thousand people. Then go China (131.4 thousand), the USA (129 thousand), and Great Britain (126.8 thousand).
Choosing the location to purchase rental property in Bali
Bali is a rather large island and some of its areas are more popular with foreign tourists in comparison to some other areas. If you would like to buy some property on the island with the intention of renting it out to tourists, you have to choose one of the more popular regions of Bali.
According to the statistical bureau of Bali, more than 350 thousand foreign tourists visited the island in the first quarter of 2023 (this is the most recent available data). The following three regions of Bali were most popular with tourists in the period:
- Canggu;
- Seminyak;
- Bukit peninsula.
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Let’s consider the overall and the regional trends in the rental property market in Bali. We will rely on the data provided by the AirDNA analytical service. The platform monitors short-term rental markets aggregating the information about more than 10 million classified ads from all over the world. It helps to obtain the most recent data about supply and demand for rental property in any place on the planet including Bali.
AirDNA also allows seeing the occupancy rates and the prices for rental property. According to the agency, the most popular type of rental property on Bali is a one-bedroom apartment or bungalow.
Demand for rental property of different types in Bali. Source: AirDNA
Occupancy rates in Bali
According to AirDNA statistics, the occupancy rates are higher in 2023 than they were before the pandemic in 2019. For instance, the figure was 57% in March 2019 and it was 70% (+23%) in the same month of 2023. THe rate was even higher in popular tourist locations.
Rental property occupancy rates in March 2019 in Bali.
Rental property occupancy rates in March 2023 in Bali.
According to the data provided by AirDNA, the occupancy rates peaked on New Year’s Eve last year (December 31, 2022). The figure was 93%. Colossal as the figure is, experts expect that the record will be broken this year.
Rental property occupancy rates on December 31, 2022. Source: AirDNA
Rental prices in Bali
According to AirDNA statistics, the average price of a one-bedroom place was between US$ 120 and US$ 130 per night in the first quarter of 2023. The price was between US$ 70 and US$ 80 in the same period of the previous year. Therefore, the prices grew by 62.5% within only one year. Such an impressive growth rate is an indication of the fact that the tourist sector is recovering quickly in Bali and a further increase in the number of foreign tourists is to be expected. As the demand for rental property grows, the prices also grow.
One-bedroom accommodations in Bali per night: cost dynamics. Source: AirDNA
The statistics also show that rental property managed by property management companies costs more. A high level of service and professional management staff add 35% to the cost of rental property on average in comparison to the property managed by the owners independently. If you would like to hire a property management company in Indonesia, please request our assistance in identifying the most reliable partners in the country.
The difference in the cost of daily rent of property on Bali managed by the owners themselves and property managed by property management companies. Source: AirDNA
The table below shows the occupancy rates for one-bedroom accommodations in the most popular regions of Bali (Canggu, Seminyak, and Bukit) in the first six months of 2023
| Canggu | Seminyak | Bukit | |
| Average occupancy rate in the first half of 2023 | 78% | 74% | 67% |
| Maximum occupancy rate | 01.01.23 — 100% 01.01.22 — 49% 104% increase | 01.01.23 — 99% 01.02.22 — 34% 191% increase | 01.01.23 — 93% 01.01.22 — 31% 200% increase |
Return on investment in rental property in Bali
Since the pandemic-related restrictions have been lifted, Bali is on the radar again. The number of foreign tourists as well as expats is now growing year after year. Active infrastructure development and international events such as the G20 summit last year, for example, make Bali an even more attractive destination for people from other countries.
Bali is mostly visited by wealthy foreigners, which sets the trends in the rental accommodations market. One-bedroom accommodations under company management are especially popular with tourists on Bali. Hotel complexes offering advanced infrastructure are in high demand too. Foreign tourists prefer relaxed vacations without any daily routines.
Our partners in Indonesia sell rental property in all the three most popular regions of Bali mentioned above. The property includes premium-class villas and apartments. If you wish (and if you have the money), you could start a development company. Please contact us to learn how you can buy land in Indonesia to build houses there. We will consult you free of charge.
When using the services of a property management company, the foreign property owner can forget about the repairs, tax payments, fiscal reports, and other documentation. The company staff will take care of all these tasks. They will send performance reports to the property owner and transfer the rental money to his/ her account.
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Immigration and tax benefits for investors in Indonesia
From September 2023, a ‘golden visa’ to Indonesia is available to foreign investors. If you would like to register a company in Indonesia and then write the rental property in its name, you can consider the following immigration opportunities:
- Employees of a foreign company that registers a subsidiary in Indonesia or launches a new business in the country with a capitalization of US$ 25 million, can qualify for 5-year golden visas. If the capitalization amount is doubled, the visa validity term becomes twice as long.
- If an individual foreign investor opens a company in Indonesia, he or she can qualify for a 5-year golden visa when the company capitalization reaches US$ 2.5 million. When the company capitalization becomes twice as high, the visa validity term is extended to 10 years. The Indonesian-based company can invest money in rental property in the country, among other things. Please request a consultation with our experts on doing business in Indonesia.
We have to note that purchasing property in Indonesia as a whole and on Bali in particular is associated with relatively high (by Asian standards) taxes that non-resident property owners have to pay. The taxes are going to decrease the overall amount of return on investment. The following taxes are payable by property owners in Indonesia:
- The tax on rental income is 20%. This is the highest tax on rental income in Asia. More is charged only in Bangladesh (25%) and Malaysia (22.4%).
- A 10% VAT is charged on gross rental income in Indonesia.
- Capital gains obtained by private individuals from sale of real property are taxed at a flat rate of 5%. The tax base is calculated by subtracting the purchase price from the sale price. No deductions for property maintenance and repairs are available.
- Sale of luxury houses, apartments, and condominiums worth more than 30 billion Indonesian rupiahs (US$ 1.92) is taxed at 20%.
- The property tax is 0.5% of the assessed value of property. The value is assessed as a ‘fair market price’.
- Purchasing real property in Indonesia with all the accompanying costs (registration fees, realtor’s commission, legal fees, property transfer fees, etc.) requires a considerable amount of investment.
We must note, however, that the legislation is currently undergoing some serious changes. It is expected that property-related taxes are soon going to become much lower in Indonesia. Please consult our experts on taxation in Indonesia.
Let us help you choose and purchase rental property in Bali
Buying some rental property on Bali can be a wonderful investment opportunity. However, you should plan carefully. Choosing the region of Bali to buy property, analyzing the competition, assessing the expected occupancy rates, calculating the taxes and property maintenance costs including repairs, marketing, Airbnb commission, etc. – you have to take multiple factors into consideration. Our experts will be delighted to give you a free consultation on all these issues.
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