Bali Studies

Bali’s a modern and a traditional place at the same time. It’s difficult to describe but easy to understand once you’ve experienced it. One of its most striking characteristics of what makes up Bali is its diversity; it’s a cultural intersection of so many people from different backgrounds.

Firstly, it’s the Balinese themselves. Gregarious, good-natured, friendly and disarming. At ease in their own land and culture and who enjoy having the outside world to learn from and participate in their fascinating adaptation to modernity. They’ve been watching foreigners come to their shores for many years and realized there’s a middle space where both sides benefit and that is what sums up the best of the Bali experience.

The Island’s always been an artistic Mecca that attracts artists from around the world. The island also plays host to a varied set of people in different industries, such as fashion, furniture, jewelry production, and the creative arts, etc.

It was people like this who first started building private villas in Bali about 20 years ago.

During the same time as the luxury hotel chains: the Aman resorts, the Oberoi, the Four Seasons, and independent brands started harnessing the natural beauty, fascinating scenery and low labor costs, consequentially creating a reputation for luxury service environments for which the island has deservedly became so famous. At this same time beautiful private homes began being constructed specifically in the whims and tastes of their individual owners.

These were beautiful homes on the expansive properties in various different types of setting; surrounded by rice-fields, perched on the edges of river gorges, and on the shores in various areas of the island.

These owners started having overseas guests come to visit them, and stay in their magnificent homes. These villas had features such as open-air living rooms, landscaped terraced rice fields, massive swimming pools, exotic hard wood floors, carved murals of ancient Hindu legends, and service staff sometimes numbering over 10 just for an individual villa.

Those guests started asking the owners if they could bring friends or family and rent the house when the owner was not there. The owner consented, and an industry was born.

It was very much a cottage industry; there was no real commercial bent. Staffing, while extensive, was sometimes best described as ‘well-meaning incompetence’. At times plumbing worked, sometimes it didn’t; that was part of the whole experience. Celebrities and media descended. Mick Jagger got married in Bali. Word about the villa as an alternative to a hotel for vacation accommodation started to quietly spread.

The building of villas, some for private homes, some to rent occasionally, some to rent all the time - started to intensify. During the early 90s land costs were almost insignificant and construction was expensive with many building parts and necessities being imported from outside the country.

laws and regulations were never the easiest to interpret or see implemented properly. Its laws regarding property where partially inspired by memories of colonial times, the countries legal structure deliberately intended to privilege the individual Indonesian land owner.

In the 80’s and 90’s was experimenting with foreign investment laws. These were mostly designed for foreign groups looking to get involved in exploiting ’s vast natural resources, such as mining companies. Often the conceptual framework was that a foreign group would commence the investment and then it was legally mandated that foreign interests would have to start divesting themselves, facilitating growing Indonesian ownership of the company.

These laws made sense considering the time and the types of industry involved, however, later on, as service related industries, and hotel groups and others started wanting to invest there became changes in the foreign investment regulations, but it was a long and complicated path. For most of the 90’s setting up a foreign investment company was incredibly complicated and very expensive.

For people investing into Bali during those times, when land had a very low cost, the simplest form of ownership structure was a lease. And the majority of villas were built on leasehold land.

Time passed, and as we moved into past the year 2000 some of the most significant things that had occurred was that Bali’s reputation as a modern luxury travel destination was solidified, the Asia crisis of 97, which had impacts throughout the region. President Suharto had stepped down, and started a true form of democracy. Meanwhile Land prices started to accelerate significantly – growing in value by 20% or more a year. In Bali, the first villa resorts, multiple villas sharing some of the same infrastructure and services, started to appear.

The other significant aspect was the growth and beginning of a professional villa industry. Many villa companies came into being; some offering property management services, some offering rental services and others offering sales agencies.

As more clients tried villas as vacation accommodation, and more villas started being offered for commercial rentals, it gave the market impetuous to start improving the product. Client’s expectations, especially at the higher end of the market, continued to increase.

In today’s day and age, 24 hour security has become a must. High quality of food preparation and serving, both local and overseas cuisine has become crucial. Large private swimming pools and other facilities such as gyms are increasingly popular. Practicalities such as broadband internet access and WIFI have also become almost mandatory.

For villa properties that deliver on these expectations, they can command a high price per night and enjoy a higher yearly occupancy.

The value of land has risen dramatically on the island over the last 6 years— an average growth rate of approximately 20% per year. Foreign investors have increasingly turned away from leasehold interests and while it’s still only possible for citizens to own land outright, there are different techniques with which foreigners can control the freehold title and thus benefit from the capital appreciation of the land.

Villa resorts are becoming increasingly more popular and prevalent on the island. When one places multiple units of luxury villas together, one gets to enjoy the economies of scale from a staffing and marketing point of view, and has the ability to provide excellent common facilities at a reasonable cost. Well designed and constructed resorts look to preserve the authenticity of the stand alone villa experience—a private villa with its own swimming pool, multiple bedrooms, and living and dining areas. It then takes services and facilities which a standalone villa is unable to provide – round the clock food and beverage service, concierge services and shared common facilities.

All of this is starting to lead into a merging of the best of a luxury hotel with the best of a private villa and the result is something to be enjoyed.

Ian Macaulay is director of development at real estate firm Elite Havens.