Some 6 months after COVID-19 has gripped the world in panic and continues to wreak havoc on the world economy, it’s time to take stock and see what happened to the Bali property market and what might be the outlook for the future.Bali went through a handful of different crises in the past decade. From bombs to SARS to GFC to volcanic eruptions, just to mention the most important ones.
What happened then? The aftermath of the Bali bomb saw the real estate market go into deep sleep for exactly 10 months. Then it slowly recovered and started where it had left before the bomb. Property prices didn’t really go down after the first Bali bomb but remained flat for a while. There were very few transactions and punters were looking for distressed assets, which weren’t really around then.
Today it’s a very different situation. The entire world economy is shrinking. Tourism is one of the most adversely affected industries all over the globe. Obviously, this doesn’t bode well for the future of real estate on an island that is so dependent on tourism like Bali and where real estate is directly linked to tourism.
So, what is happening in Bali?
It’s always good to speak to notaries and get their feedback as they are the ones who know exactly what is going on. Property sales almost went to zero in the beginning of the Covid-19 crisis but since May 2020, there seems to be an increase in deals being made, mostly by Indonesian buyers as foreigners are still not able to visit Bali and there are not that many left on the island with an appetite (or the budget) to buy property. I am told that most of those deals that are being made these days are struck at prices between 30 – 50% below pre Covid-19 asking prices, mostly freehold properties, of course, and in the middle and upper range of the price segment.
A look at the various property portals and agent websites doesn’t seem to confirm this downward price trend. Prices are still advertised at nearly pre Covid-19 levels.
How come? I think that most vendors haven’t really understood what is happening or they don’t want to be seen as desperate and hence haven’t adjusted their prices. However, we know of negotiations, particularly for luxury properties above the half a million USD mark and for bare land, where vendors have agreed to half their prices and still haven’t secured a sale. In this market, the only way to find out at what price a property is going to be sold for, is to make an offer and see what happens.
What is the outlook for the property market in 2021 and 2022? We are definitely seeing the most severe correction since I have been observing the Bali market for some 25 years now. Will it recover? Of course, it will but I don’t anticipate it going back to pre Covid-19 levels in the next few years. A lot depends on how tourism is or is not going to recover. Bali might finally use this as an opportunity to move a away from cheap mass tourism to a more sustainable cultural tourism, where the goal is not to achieve annual growth rates of more than 10% but to preserve what Bali has to offer the world and not erode it by ever growing masses of tourists that clog the roads and destroy the environment.
I predict that Bali will become more and more attractive for foreign and domestic residents, families and young couples that are avoiding the air-conditioned cities in Asia and are looking for a more balance lifestyle away from the megacities. Perhaps, this will bring a more equal distribution of development to the island and not one that is only focusing on the south of the island.
Dominique Gallmann, Exotiq Property