Due to Indonesian law, foreign investors cannot directly own land in Bali. However, they have several options for acquiring property. The most common route is through leasehold agreements, which typically last for 30 years and can often be extended. Additionally, foreigners can establish a PT PMA (Penanaman Modal Asing), a foreign-owned company, which allows them to hold freehold ownership of property​(InvestinAsia). This flexibility in ownership structures is particularly appealing for long-term investments in Bali’s burgeoning real estate market.

Phuket, on the other hand, offers a different set of challenges. Foreigners can purchase property, but they are restricted from owning land outright. Instead, they must establish a Thai company or enter into long-term leases, typically lasting up to 30 years, with an option to renew​(Bali.RealEstate). While the legal processes in Phuket are manageable, the requirement for establishing a company can be a barrier for some investors, complicating the investment landscape.

Tax Obligations

Understanding tax obligations is critical for foreign investors as they can significantly impact profitability.

In Bali, the tax system is relatively straightforward. Essential taxes include the Land and Building Tax (PBB), which is relatively low, as well as the Property Transfer Tax and Value Added Tax (PPN), currently set at 11% for properties sold by professional developers​ (InvestinAsia). The low tax rates make Bali an attractive option for investors looking to maximize their returns.

In Phuket, the tax obligations are more complex. The Property Transfer Tax is set at 2%, and if the property is sold within five years of acquisition, a Specific Business Tax (SBT) of 3.3% applies​(Bali.RealEstate). These additional taxes can erode profits and complicate financial forecasting for investors. The comparative simplicity of Bali's tax landscape could be a decisive factor for foreign buyers.

Market Growth Potential

Bali and Phuket have experienced growth in their real estate markets, but the trajectory and potential differ significantly.

Bali has seen a remarkable resurgence in its property market following the lifting of COVID-19 travel restrictions, drawing considerable foreign interest in vacation rentals and residential properties ​(InvestinAsia). The island’s tourism-driven economy contributes to ongoing demand, enhancing property values and rental yields. Bali's strategic focus on attracting international visitors—through wellness tourism, cultural experiences, and eco-friendly initiatives—positions it for continued growth in the coming years.

While still a popular tourist destination, Phuket has shown signs of market saturation, leading to slower growth rates than Bali​(Bali.RealEstate)​(Lazudi). The island’s reliance on mass tourism may pose challenges as competition increases, and investors could find it harder to achieve high returns in a crowded market.

Which one is better?

Bali and Phuket offer appealing property investment opportunities, each with unique advantages. Bali provides a flexible legal framework for foreign investors, allowing long-term leasehold agreements and the option to establish a PT PMA for freehold ownership; this flexibility can enhance investors' security.

While Phuket has charm and established infrastructure, Bali’s tax structure is generally more favorable, with lower property taxes than Phuket. Bali’s real estate market is also experiencing notable growth, driven by a resurgence in tourism after COVID-19. The island’s vibrant culture, stunning landscapes, and focus on wellness tourism make it a compelling destination for living and investing, catering to diverse preferences and lifestyles. 

In summary, both locations have their merits, but Bali's unique blend of legal options, tax advantages, and lifestyle appeal make it a noteworthy consideration for property investors in Southeast Asia.

Where to Invest in Bali?

The real estate market in Bali offers a wide selection of properties, from luxury villas to minimalist studios or apartments. As one of the leading property agencies in Bali, we recommend you invest in Canggu, Seminyak, and Uluwatu. These locations are home to 5-star hotels and world-class beach clubs.

Canggu's pristine beaches are perfect for surfing, and its vibrant lifestyle makes it a hotspot for property investment in Bali. There are many selections of unique restaurants, high-end boutiques, world-class beach clubs, and international schools.

Furthermore, Uluwatu offers breathtaking views of the Indian Ocean's stunning coastline and is home to the majestic Garuda Wisnu Kencana statue. Additionally, Uluwatu is an excellent place to surf, as its beaches provide perfect waves for beginner and expert surfers. 

Seminyak is a place for those who seek an upscale lifestyle. Its location offers beautiful beaches, a restless nightlife, and a wide range of delicate dining areas. 

In addition, Seseh, Cemagi, and Pererenan are experiencing rapid growth in property development, making them ample locations for investment. Bali is renowned for its stunning natural landscapes, vibrant expat communities, and rich cultural heritage. 

When considering real estate investment, Bali stands out with its expanding villa market and booming tourism sector. These make it an attractive option for those looking to achieve robust rental returns. 

While Bali and Phuket present significant opportunities for property appreciation, Bali's unique blend of culture and natural beauty solidifies its position as a top choice for Southeast Asian investors.

So, have you secured your dream property in Bali? Take a look at our property collection and book a consultation with us.

Under USD 150k, it is not uncommon to find an apartment with a lease term beyond 25 years in our listing, just like this apartment in Berawa.

Photo by Bali Home Immo

A well-managed rental apartment can give you more than 10% returns, and it is not uncommon to get your capital back within 5-7 years. The rest of the lease period can let you generate more income for years. And if you’d rather be more relaxed, you can use your apartment in Bali as a pied-a-terre while you travel to the island.

Villas with Shorter Lease Periods

Alternatively, consider investing in villas with lease durations ranging from 10 to 15 years. Opting for shorter leases facilitates easier rate negotiations and promises a high return on investment. 

You can get this fully furnished modern villa in Seminyak for just USD 90k.

Photo by Bali Home Immo

Villas with a lease period of 10-15 years typically achieve break-even within a maximum of 3-5 years. While lease extensions are not assured, numerous instances exist where investors have found the opportunity to extend for an additional 5-10 years after initially investing in a villa.

We have curated some villas that tick all the marks for investment. Check this link to explore more options for apartments and villas with leaseholds in Bali.

Disclaimer: The content provided in this article is intended for informational purposes only and should not be construed as legal, financial, or investment advice. Bali Home Immo does not assume any responsibility for losses or damages incurred by readers based on the information contained herein. It is strongly recommended that readers consult with qualified legal or financial professionals and experts before making any legal or investment decisions.

In 2021, Bali retook 1­st place in Tripadvisor’s Travelers' Choice Award after a small setback that sent it to 4th place in the previous year. This signifies that Bali hasn’t lost its charm despite the pandemic and the international community yearns to explore the island again. According to Forbes, Canggu in particular was listed 4th best place to live and invest overseas for 2019 and is still the most sought-after destination even today. The coastal town of Canggu is a haven for people with various aspirations because of its ability to accommodate diverse lifestyles, thus it should not be surprising why many of them choose to stay there for a long term.

Canggu’s short-term rental market has always been prosperous thanks to the frequent influx of vacationers and professionals alike. The COVID-19 pandemic is merely a small speed bump to Canggu’s potential, as it has developed steadily before the pandemic and will continue to do so. Once the border reopens, the entire region will be flooded by visitors looking to rent a villa and it would be amiss to not seize such a promising opportunity. After thorough research and evaluation on the market’s previous performance, we have highlighted 3 advantages why investing in Canggu’s short-term rental during the pandemic is a lucrative venture:

All statistics displayed below are based on 2017-2019 data obtained from Airbnb and Vbro that have been analyzed with AirDNA

1. Thriving market

The villa rental business in Canggu had undergone rapid growth, especially in demand. The town offers plenty of room for financially rewarding developments in the short-term rental industry as demand is considerably larger than the supply. The following diagrams illustrate the supply and demand growth of Canggu’s villa rental market prior to the pandemic.

Listing data from 2019 shows that the supply of villas with more than 5 bedrooms numbered less than 10%, but the demand growth for such properties was substantially larger in comparison to villas with fewer bedrooms. The supply margin of 1-bedroom and 2-bedroom villas was very narrow, yet demand for the former increased at a much greater rate than the latter. On another note, the demand for villas with 6 or more bedrooms grew twice the size of 2-bedroom villas’ demand. As for 2 to 5-bedroom villas, the demand increased accordingly with the number of supplied bedrooms. Average demand growth was at 84%, thus the number of investment opportunities will remain plentiful in the future.

2. Revenue growth

The regular supply of foreign travelers created growing revenue for most of Canggu’s short-term rentals over the years. From 2017 to 2019, many villa rentals in the area experienced remarkable revenue growth as depicted by the chart below.

Within 3 years, the average annual revenue in the upper quartile gained a substantial increase while villas in the median earned a comparatively smaller gain. This growth disparity was made possible largely due to the difference in management and marketing quality. Villas that are developed, marketed, and managed professionally tend to sell better and faster than their competitors because they are capable of meeting customer’s needs and providing better service overall, which in turn yield positive reviews and higher returns regardless of the number of bedrooms. Hence, hiring professional assistance is a no-brainer in order to maximize the profitability of your investment.

3. Lucrative returns

In 2019 alone, 1 and 2-bedroom villas generated steady earnings every month throughout the year. A notable revenue increase can be seen in villas with 3 and 4 bedrooms during the peak season, which yields 10% to 15% higher income in comparison to the medium and high season. Villas with 5 and more bedrooms produced significantly better returns, particularly during the peak season when they brought more than twice the revenue of 4-bedroom villas in the same season. It is worth noting that the substantial revenue of villas with 6 or more bedrooms combined with their high demand reveals a highly prospective opportunity to invest in Canggu’s market.

For more information on Bali’s property market and/or full investment consultation in Canggu or the nearby areas, please book an appointment with Bali Home Immo. If you are looking to rent a villa, feel free to browse our long-term rental catalog and see all the villas that are available for monthly or yearly rental. If you are looking to buy a villa, we also have a handpicked selection available for sale both leasehold and freehold in our catalog. Or if you want to develop your investment from the ground up, we also have a selection of land and off-plan villas ready to be built.