Fri
04 May
2018

From Bali to Barcelona: the perks and perils of an overseas holiday home

Cheap flights, beautiful beaches and warm tropical weather make Bali a popular destination for Australian tourists. But what if you want to establish a more permanent base on the island paradise?

Perth-based real estate agent Greg Smith is senior director of Elders Bali which opened a Bali office three years ago when the popular tourist destination was in the midst of a property boom.

According to Mr Smith, there are three distinct groups of Australian buyers in Bali: single male, fly-in fly-out mining workers with high disposable incomes; regular holidaymakers; retirees looking to take advantage of the low cost of living.

"It's a lifestyle decision, [as] the cost of living is much lower," Mr Smith says.

For young mining workers working away from home for extended periods of time, Bali offers a convenient and inexpensive home-base alternative to Australia.

"If you've got a villa in Bali for $180 to $200 a month, you can have a full-time maid looking after it and keeping it clean. So it's not like in Australia where if you're doing fly-in fly-out there's no one watching the property or keeping it clean, and if you've got a pool, it becomes a duck pond," Mr Smith says.

Regular holidaymakers who visit Bali several times a year may also choose to buy a holiday home in the Indonesian tourist destination.

"They buy a villa that they use themselves, and most are constructed in a way where there's a room you can lock up clothes, personal things, surfboards, golf clubs, all the things that improve the holiday lifestyle so that they can get off the plane with nothing but their passport and their wallet, and everything's there," Mr Smith says.

"They'll often rent it to friends and family, or put it on Airbnb, so they can cover the cost of holding the villa, and actually can make a profit, depending on how much they use it."

According to Mr Smith, Australian buyers can spend anywhere from $150,000 for a villa outside of popular tourist hotspots like Seminyak, to $5 million for a palatial cliff-top residence in Uluwatu.

"People can make $125,000 a year from prime, holiday-rental villas that are spacious with a nice pool and walking distance to the beach and restaurants," Mr Smith says.

The real estate market in Bali has matured after prices peaked, then plummeted, a few years ago, Mr Smith says.

"In 2014-15 development got ahead of demand and there was almost an oversupply of villas," he says.

"Then we've had a couple of volcanoes, so the tourist numbers dropped back a bit and so did the returns. A lot of people wanted to exit, so the market dropped. Now values have started to climb again."

As with all overseas property transactions, Australians looking to buy in Bali need to have a comprehensive understanding of local laws and culture. Indonesia's constitution precludes foreigners from owning land outright, so Australians can opt for a leasehold title or a right-of-use title.

It's not all sunshine and Bintang, though. Mr Smith has numerous horror stories about gullible Australians who failed to do their homework and lost large sums of money to scammers.

"I say 'buyer beware': if you're not using a proper real estate agent in Bali, you had better be very, very careful.

"The only protection is the person that's looking after the transaction for you."

Chairman of Property Investment Professionals of Australia, Peter Koulizos, is quick to emphasise that the purchase of a holiday home should be viewed as a lifestyle decision, not as a sound investment option for the average Australian.

Australians shopping for overseas holiday homes tend to be older, high net-worth individuals, he says.

"It's generally people over the age of 50 who have had plenty of experiences going overseas and have generally been to one place more than one time and they're thinking about holidaying there more often," Mr Koulizos says.

"Most of them buy with cash because they know how hard it is to borrow money."

According to Mr Koulizos, popular destinations for overseas holiday homes include France, Italy, Spain, and New Zealand.

"Generally they're relatively cheap and great places to holiday," he says.

For those looking to buy a dream holiday home overseas, there's a long list of potential pitfalls to be mindful of.

"Firstly finance, Australian banks are hesitant to lend money to borrowers wanting to buy overseas," Mr Koulizos says.

"Secondly, lax property laws. Australia's laws are very tight, the same can't be said of all countries. Then there's tax issues, and you may need an overseas accountant."

Navigating different languages and cultures where the landlord-tenant relationship differs from the Australian norm can also be a challenge.

"You're susceptible to being ripped off as an absent landlord," Mr Koulizos says.

And finally, the currency risk.

"Even though the rent may stay the same the Aussie dollar might go up and down compared to the local currency," Mr Koulizos says.

 

Isabelle Lane, The New Daily, 4 May 2018
https://thenewdaily.com.au/money/property/2018/05/04/buying-holiday-homes-overseas/ 

 

 

 

 

 

 

 

 

 

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