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Bali Property: A Bubble That's Ready to Burst

Bank Indonesia Says Baliís High Property Prices are Not Sustainable

Bali News: Bali, Indonesia, property bust, property boom, Putu Dewa Selawa, REI, Real Estate Indonesia, Bank Indonesia, real estate bubble, Dwi Pranoto, zoning regulations, green zones
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(7/28/2013) reports that the Bali branch of Bank Indonesia will continue to try to control real estate prices on the Island in a sector the Bank views as “on alert” against a possible bubble, capable of bursting and sending prices tumbling.

Dwi Pranoto, the head of Bank Indonesia – Bali and Nusa Tenggara said the rapid and significant increase in real estate prices from year to year requires caution in the face of high costs, especially in South Bali.

The close supervision of property prices by Bank Indonesia is needed to prevent a bubble economy. Bank Indonesia’s current view is that properties are priced at unsustainably high levels.

Continuing, Dwi described how real estate brokers in Bali are involved in speculation. He contends that the growing bubble built by speculation resembles past bubbles that have occurred in Jakarta, South Sulawesi, Batam and Riau. “In fact, the price of land in Bali, in real terms, is not so high,” Dwi said.

The Bank Indonesia
executive blamed the current spike in property prices in Bali on brokers who justify higher prices with the completion of various infrastructure projects, including the Island’s first toll way, the underpass at Simpang Siur and the renovation of the Ngurah Rai Airport.

To try to moderate Bali’s property prices Bank Indonesia is reviewing loan to value ratios against loans extended by Indonesian banks. Changes in the current loan-to-value ratios will be introduced by Bank Indonesia in September 2013.

Meanwhile, Bali business interests are urging the government to quickly define areas reserved for tourism development in the face of diminishing land areas remaining for shared public use and other purposes.

Government Failing its Regulatory Responsibilities

The chairman of Real Estate Indonesia-Bali (REI-Bali), Putu Dewa Selawa, said the increasing loss of land for development projects demands that clear zoning laws be implemented as soon as possible. Developers need clear guidelines on lands available for development and lands reserved as no-build green zones.

At the same time, Selawa, called on the government to set aside areas for essential services, such as hospitals and places of higher learning. The real estate businessman reminded the government that they are failing in their role as a regulator by not clarifying zoning regulations.

Selawa acknowledged the need for a role by foreign investors in property development in Bali, while, at the same time, insisting the role of foreign property investors must be controlled by firm rules in order to prevent losses to Indonesia.

He said that a lack of socialization regarding no-build green zones in Bali has resulted in people purchasing land in these areas.

Tourism operators are also urging the government to delineate tourism zones, residential areas, and zones for government or public use in order to improve the business and investment climate in Bali.

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