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Rental property market in Amed
Buying a villa in Amed as a rental property investment is a great way to generate a passive income.
The demand for holiday rental villas in Amed is growing at a rapid rate. Investors are looking to buy villas in Amed to capitalize on the increasing demand.
The region of Karangasem has recently been designated as an official tourist zone.
This has created an influx of tourists as they discover a more laid back way of life than can be found in the congested resorts in the south of Bali.
However, finding a luxury villa for rent in Amed is not easy. 3-bedroom villas with a swimming pool and landscaped garden are in short supply. The villas that are available are typically occupied.
Demand for holiday villa rentals
As Bali’s tourist numbers get back to pre-pandemic levels, the demand for luxury holiday villas for rent has exploded.
With the help of online booking platforms like AirBnb, private villa holiday accommodation is much easier to find than ever before.
Instead of paying for multiple rooms in hotel resorts, families are finding much better value by renting a private villa for their holiday accommodation.
Access to multiple bedrooms, comfortable indoor living spaces and beautifully landscaped gardens are all part of the attraction.
On top of the privacy and convenience a holiday villa offers, villa rental costs are often cheaper than hotel resorts.
Known for its world-class diving, stunning tropical scenery, lower cost of living and much slower pace of life, visitors to Amed experience a closer connection to the cultural heritage of Bali.
As a relatively undiscovered location, the infrastructure, amenities and road networks in Amed are less developed than the more established areas around Kuta, Canggu and Seminyak.
However, the local government is currently making aggressive moves to develop the road networks in Amed.
This is making the town more accessible to the increasing tourist numbers.
As more tourists begin to discover Amed’s charm, more amenities, restaurants and lifestyle activities are beginning to emerge in anticipation of increased tourist spending.
Supply of holiday villas in Amed
The supply of holiday rental villas in Amed is short of the current tourist demand. You may wonder why such an appealing location has not catered more for the tourist demand?
For a simple explanation, we can look at the land zoning laws of Indonesia that are currently restricting real estate development in Amed.
Land zoning in Bali
Land zoning and the designation of land titles essentially dictate how land in Bali can be used.
The central land authority of Indonesia (OICRF), based in Jakarta, is responsible for assigning a specific zone to individual plots of land.
Below you can see the main land zone categories and their purpose;
Green Zone – This is protected land and property can not be built on.
Yellow Zone – Building villas for sale or rent and houses to live in are permitted.
Red Zone – Building commercial enterprises such as hotels, villas, offices and shops are permitted.
With the large majority of tourist development being focussed in the southern parts of Bali, the central land authority of Indonesia has designated much of the southern area as Yellow and Red zone.
This has facilitated a decade-long real estate boom in the south, as an abundant supply of rental properties have kept up to the increasing tourist demand.
Unlike Amed however, that as a relatively undiscovered location, much of the land zoning in remains in the Green zone.
This has prevented the real estate market from really taking off as property developers are unable to build at scale.
Emerging real estate market in Amed
As a part of a newly designated tourist region, the real estate market in Amed is on the cusp of significant change.
As a foreign investor, securing the land title rights in Amed is a frustrating process. Finding Yellow or Red zone land in the right location requires research and patience.
As more tourists are beginning to choose Amed as a holiday destination, local Balinese landowners are recognising the opportunity to sell their land to foreign investors for the purpose of real estate development.
However, much of the land for sale in Amed remains designated as Green zone land and therefore development of property is strictly prohibited under Indonesia’s Agrarian law (UUPA).
In this case, landowners in Amed are becoming frustrated as they are unable to sell their land.
As a result, landowners are beginning to place increasing pressure on the authorities to re-categorize their land from in order to facilitate property development.
Demand for buying development land in Amed
The demand from foreign investors looking to buy suitable building land in Amed is soaring.
As part of our land brokerage services, we help clients to identify suitable plots of land to meet their development needs.
We are noticing a significant increase of enquiries coming from foreigners who are interested in acquiring land in Amed to develop residential and holiday rental villas.
Unfortunately, due to the land zoning reasons explained above, the supply of available land is somewhat restricted.
Land re-zoning is coming to Amed
Through the increasing pressure of local landowners, Amed’s land zoning issues are now becoming a priority for the land office.
There has recently been a steady stream of land re-zoning taking place in Amed, helping landowners to capitalise on the demand. However, as resources at the land office are limited the process is slow.
Price of land in Amed
Land prices in Amed are currently much lower than prices in the more developed south.
At the time of writing, land available in Amed on a 25 year leasehold is priced on average at around 4 million IDR per are/year ($250 USD).
Compared with similar land in Uluwatu for example, where the cost per are/year is currently around 4 times the price at 15 million IDR per are/year ($995 USD).
Effect of land prices on property prices
As a property investor, the underlying asset of land ownership is perhaps the most important factor when determining the value of a property.
Whilst the actual structure of a villa can be priced in terms of dollar value, it is always the price of land that determines the true value of the ‘property’.
The higher the value of land, the higher the price of a property.
It is a simple equation that is relevant to real estate worldwide.
Property prices in Amed
A newly built luxury 3-bedroom pool villa built on 500sqm (5are) of land in Amed can be bought for around $250,000 (this price assumes a 25 year leasehold term with a 25 year extension).
A like-for-like property in Canggu will cost around $650,000.
The difference in price is not a result of a superior build or more luxurious fixtures and fittings.
The difference in price is because the price of land in Canggu is much more expensive to acquire than the price of land in Amed.
Value appreciation in Amed
As discussed, property prices in Amed are currently much lower than other areas of Bali.
We have determined that the reasons for this are;
- Lower land prices – due to land zoning limitations that restricts the development of land
- Infrastructure – road networks, amenities and activities
The authorities at the land office are currently re-zoning areas of Amed and the local government are in the process of developing infrastructure.
Evidence of this can be seen with the work being done to widen the main road that runs through the town centre of Amed.
As land acquisition and road networks become more accessible, the price of land will rapidly increase due to the laws of supply and demand.
We are expecting the price of land in Amed to increase by 400% during the next 10 years. In turn, we expect that property prices will follow a similar value appreciation model.
Is a rental property in Amed a good investment?
Buying a rental property in Amed whilst prices are low, supply is short and rental demand is strong provides investors with an exceptional investment opportunity.
Rental occupancy rates range between 70% – 90% depending on the time of year.
Even during the low season, 70% occupancy rates generate attractive income returns for investors.
Below are examples of how a 3-bedroom pool villa can perform as a rental investment over a period of 25 years;
Conclusion
Besides generating regular income from a rental property, investors can also benefit from increasing property values over the long-term.
Land and property prices throughout Bali have exploded over the last decade. The average price of land in Bali per are per year has grown a staggering 235%.
As an average price, we must consider that some areas have grown at a higher rate, whilst other areas have grown at a slower rate.
Amed’s real estate market has not yet been exposed to Bali’s property market boom.
Areas in the south of the island, where land zoning laws, infrastructure and amenities are more developed, have benefited greatly from rising land and property prices.
The rapid rise in real estate valuations has priced many property investors out of the market in places like Canggu, Uluwatu, Kuta and Seminyak.
In turn, investors are exploring other areas of Bali that are primed to experience a significant period of real estate growth.
Amed is one of the main areas that will benefit greatly from this shift. As tourist numbers to the region increase, land and property valuations will rise.
Simply put, buying a villa in Amed as a rental property investment before prices start to rise will generate substantially more attractive returns for investors.
Interested in buying a villa in Amed?
Talk to us for more information on buying a villa in Amed.
Our Amed based real estate specialists will be happy to answer your questions.
We will provide you with all the information you need to know on how to buy, own and capitalize on the real estate market in Amed.
