Renting vs. Buying
-Bali-
“Kontrak atau beli,” - (LEASE OR BUY)
Legal Considerations for Expats
Legal Considerations for Expats in Bali
Renting vs. Buying Property as a Foreigner in Bali
Renting Property:
Lease Terms & Agreements: Renting is the simplest option for expats in Bali, with leases commonly lasting from 6 months to 2 years, though monthly or weekly rentals are also available for short-term stays. A typical deposit is 1-2 months' rent upfront.
Contract & Legal Process: Lease contracts should be detailed, outlining the rental amount, duration, maintenance responsibilities, and any restrictions on property use. While most contracts are in English and Indonesian, it’s essential to have a contract reviewed by a lawyer familiar with Indonesian real estate law.
Long-Term Leases: Expats often secure long-term leases (known as Hak Sewa) ranging from 25 to 30 years, with the possibility to renew. This offers a viable option for expats seeking a more permanent stay without property ownership.
Buying Property:
Ownership Restrictions for Foreigners: Under Indonesian law, foreigners cannot directly own freehold land (Hak Milik). However, expats can use various legal structures to gain long-term rights over property:
Right to Use (Hak Pakai): Foreigners can hold land under Hak Pakai for up to 30 years, with an option to extend for 20 more years, followed by an additional 30-year renewal. This allows for long-term residence without ownership.
Right to Build (Hak Guna Bangunan - HGB): Foreign-owned companies (known as PT PMA) can acquire the right to build for 30 years, extendable up to 80 years. This structure is more complex but allows for ownership of the building on the land.
Foreign-Owned Companies (PT PMA): If a foreigner wishes to have more control over the property, they can establish a PT PMA, which is a foreign-owned limited liability company. The PT PMA structure allows for the lease or use of land under Hak Guna Bangunan, enabling the company to effectively own the building and hold land-use rights.
Key Legal Considerations & Things Expats Need to Know
Land & Building Ownership Distinctions: Foreigners can own buildings but not freehold land. When buying a villa or house, expats essentially own the structure but lease the land under one of the permissible ownership rights (Hak Pakai or HGB).
Due Diligence & Legal Assistance: Conducting due diligence is crucial when leasing or buying property in Bali. This involves verifying the land title, ensuring the property complies with zoning regulations, and confirming that there are no disputes or encumbrances. It is strongly advised to work with a reputable lawyer who understands Indonesian property law.
Taxes & Transfer Fees: Expats purchasing property in Bali need to consider transfer taxes, notary fees, and legal costs. The primary taxes include a 5% sales tax (PPH) on the property’s sale value and a 10% VAT for new properties or commercial leases.
Hak Pakai vs. Hak Sewa: Choosing between Hak Pakai (Right to Use) and Hak Sewa (Leasehold) depends on your long-term goals:
Hak Pakai offers a longer lease period and may provide greater legal stability.
Hak Sewa is often used for shorter leases and offers more flexibility without the complexities of obtaining a land-use certificate.
Property Maintenance & Management: Expats who buy villas often use property management companies to handle maintenance, rental services, and legal matters. Fees for these services can range from 10-20% of the rental income.
Pros & Cons of Renting vs. Buying for Expats:
Renting:
Pros: Offers flexibility, minimal legal complexity, and allows for exploration of different areas before committing. Renting is ideal for short- to medium-term stays.
Cons: No property ownership, and rent prices in popular areas may be high, especially for luxury villas or beachfront properties.
Buying:
Pros: Suitable for long-term expats or those interested in investing in the growing Bali property market. Offers the potential for rental income and a stable residence.
Cons: The legal process is complex, and ownership is limited to leasehold arrangements or right-to-use structures. Working with a trusted lawyer and navigating the legal structure can be time-consuming.
Cost and Availability of Real Estate in Popular Areas
Seminyak & Petitenget – Trendy & Upscale Living
Renting Costs & Availability:
Luxury Villas & Condos: Seminyak is known for its luxury villas, trendy cafes, and nightlife. One-bedroom apartments or condos typically rent for $500-$1,500 per month. For a larger villa with 2-3 bedrooms and a private pool, rent can range from $1,200-$4,000 per month, with high demand for furnished, fully serviced villas.
Short-Term & Long-Term Options: Rental options are available for both short- and long-term stays, with most landlords open to monthly, 6-month, or annual leases.
Market Trends & Availability: Seminyak’s market is thriving with a mix of expats, tourists, and digital nomads, keeping demand high and prices steady. Availability is good, but prices may spike during peak tourism seasons.
Buying Costs & Market Trends:
Condos & Villas: Buying property in Seminyak is pricier compared to other areas of Bali, with one-bedroom condos or apartments costing $100,000-$200,000. Larger villas with pools and prime locations can range from $300,000-$1 million+, depending on size, amenities, and proximity to the beach.
Investment Potential: Seminyak is a hotspot for vacation rentals, offering strong rental income potential. The market continues to grow as an attractive location for those looking for luxury living and investment.
Pros & Cons for Expats:
Renting: Ideal for short- to medium-term stays with the flexibility to experience the lifestyle without ownership commitment.
Buying: Recommended for expats interested in investment opportunities, stable returns from vacation rentals, or those planning to live in Bali long-term.
Canggu – The Bohemian Beachside Community
Renting Costs & Availability:
Trendy & Affordable Rentals: Canggu is popular with digital nomads, surfers, and young expats. Renting a one-bedroom apartment costs around $400-$1,200 per month, while villas with 2-3 bedrooms range from $900-$2,500 per month.
Short-Term & Long-Term Stays: Rentals are typically furnished, and long-term leases (6 months to a year) are common. Monthly rentals are available but come at a premium, especially during high tourist seasons.
Market Trends & Availability: With the rising popularity of Canggu, availability has grown significantly, with new villas and apartments regularly entering the market. However, demand remains high, leading to competition for the best properties.
Buying Costs & Market Trends:
Condos & Villas: Villas are the most common type of property in Canggu, with prices ranging from $150,000-$400,000 for a basic 2-bedroom villa and upwards of $500,000 for larger, luxury properties near the beach.
Trendy Investment Area: Canggu's rapidly growing market makes it a great choice for investment, particularly for short-term rental income through platforms like Airbnb. The neighborhood’s appeal to younger expats and tourists drives steady appreciation and rental demand.
Pros & Cons for Expats:
Renting: Perfect for expats looking to stay short-term, explore the bohemian lifestyle, and access nearby beaches and coworking spaces.
Buying: Best suited for long-term expats and investors who wish to capitalize on the vacation rental market and growing demand for trendy accommodations.
Ubud – Wellness & Cultural Haven
Renting Costs & Availability:
Affordable & Tranquil Living: Ubud is known for its rice paddies, wellness centers, and yoga retreats. A one-bedroom apartment rents for $300-$800 per month, and villas are available from $700-$2,000 per month for more space and amenities like pools.
Long-Term & Retreat Rentals: Properties in Ubud often have a focus on tranquility, with options for long-term leases (1 year or more) and short-term stays for retreat guests.
Market Trends & Availability: The Ubud market remains steady, with an abundance of villas, cottages, and bungalows available for expats seeking a peaceful environment. The demand for wellness tourism has helped maintain strong rental rates.
Buying Costs & Market Trends:
Villas & Bungalows: Villas in Ubud cost between $120,000-$300,000 for a basic property, and larger, luxury villas can go upwards of $400,000. Properties with more extensive land or those close to the center of town may be priced higher.
Stable & Niche Market: Ubud attracts expats interested in wellness, spirituality, and a slower pace of life. It’s a stable market for long-term rentals and offers a good opportunity for those wanting a retirement home or investment in wellness retreats.
Pros & Cons for Expats:
Renting: Ideal for those wanting to explore Bali’s cultural side and enjoy a slower, peaceful lifestyle without committing to ownership.
Buying: Best for expats who wish to make a long-term move to Bali for wellness purposes or are interested in the niche rental market for retreats and cultural stays.
Sanur – Family-Friendly & Laid-Back Coastal Living
Renting Costs & Availability:
Calm & Accessible Rentals: Sanur is known for its family-friendly atmosphere and quieter beaches. One-bedroom apartments rent for around $400-$900 per month, and villas range from $900-$2,500 per month, depending on size, location, and amenities.
Long-Term Leases Preferred: Sanur tends to attract families and retirees, with long-term leases (1 year or more) being the most common arrangement. Furnished properties are readily available.
Market Trends & Availability: Sanur has a stable real estate market with a focus on comfort, privacy, and accessibility to beaches and international schools.
Buying Costs & Market Trends:
Family Villas & Condos: Villas and family homes cost between $150,000-$400,000. Luxury villas with pools or beachfront access can go up to $500,000 or more.
Stable Family-Oriented Market: Sanur is a popular choice for expats with families due to its quieter lifestyle, making it a secure investment for those looking to settle down or enjoy retirement by the beach.
Pros & Cons for Expats:
Renting: A great option for families and retirees seeking a long-term stay with easy access to international amenities and a relaxed environment.
Buying: Best for expats looking for stability and a community-focused neighborhood that is close to the beach but less hectic than other tourist areas.
Jimbaran & Nusa Dua – Luxury Coastal Living
Renting Costs & Availability:
High-End Rentals & Villas: Jimbaran and Nusa Dua are known for luxury beachside living. A one-bedroom condo or apartment costs $600-$1,500 per month, while luxury villas with private pools range from $1,500-$4,000+ per month.
Upscale & Serviced Rentals: These areas offer some of the most luxurious properties on the island, often fully serviced with amenities like housekeeping, pools, and security.
Market Trends & Availability: The rental market is stable but leans toward higher-end options, making these areas ideal for expats who prefer upscale accommodations and proximity to five-star resorts.
Buying Costs & Market Trends:
Luxury Market & Beachfront Villas: Villas in Jimbaran and Nusa Dua start at $200,000-$500,000, with luxury beachfront properties often exceeding $1 million. Condos with ocean views can range from $150,000-$300,000+.
Investment & Upscale Living: As some of the most sought-after areas in Bali, Jimbaran and Nusa Dua provide good investment opportunities, particularly for luxury vacation rentals and high-end living.
Pros & Cons for Expats:
Renting: Suited for those seeking a luxury lifestyle in Bali, with access to resorts, beaches, and upscale amenities.
Buying: Best for expats looking to invest in high-end properties, enjoy beachfront living, or own a villa that can generate premium rental income from tourists.
Summary for Expats:
Renting: Recommended for expats seeking flexibility, short-term stays, or those looking to experience different regions of Bali before making a commitment.
Buying: Ideal for long-term residents, retirees, or investors interested in rental income, vacation properties, or luxury living in popular coastal areas.