Foreigner buying an apartment?

[Bikerbule]

With the new regulations, which I don't fully understand, it seems it is now possible for foreigners to purchase apartments. So i'm thinking about putting some savings into an apartment in Surabaya. It won't be a new build.
Don't know anything about property investment here, so what are some potential problems?
Possible to lease out? via airbnb? or to another foreign worker?
Are apartments generally ok investments here? for about 5 - 10 years.

 

[azrielariel]

What new regulations?

 

[snpark]

Personal opinion - save your money. It's a renter's paradise and (in Jakarta at least) the returns on buying an apartment and trying to rent it and hoping for capital appreciation are slim (with some exceptions) plus the legal hassles - unless you intend to stay forever and live here (wife, kids etc) I would just keep it in the bank and rent a place.

That's just my theory as expanded on other threads. Perhaps in Surabaya the market is different.

 

[azrielariel]

I tend to agree with SNPARK but I'm curious if the law that barred a foreigner from owning free-hold still stands. I've seen this mentioned before but what people weren't aware of is the title can be leasehold or freehold.

Usually an article that touted "Own Property" was about long term leasing, not flat out ownership.

 

[steveandpenny]

It's my understanding (and I'm all most alwas wrong) but you can own a apartment but you can't own land. It alwas has to fall in a price range that is very expensive to have it legal. As a foreigner you can not own land in your name anywhere in Indonesia. I've heard too many stories from expats that say they were told you could and then they find out that they dont own anything down the road.
So my advice is talk to a lawyer about any land purchase then go talk to another one to see if he says the same thing ! Listen to the one that says stuff you dont want to hear ! Then take the paperwork to a independent translator and sit down and read it carefully. Spend some money now and make sure you dont lose a bunch of money.

 

[dafluff]

When I heard about this law a few years back, I researched it a bit and found that it was patently unappealing.

Can't remember all the details, but there were some minimum pricing involved (Rp 5 billion for Jakarta IIRC), have to buy direct from developer, plus there were nebulous clauses such as "the foreigner has to be beneficial to Indonesia".

I don't know the situation elsewhere in Indonesia, but in Bali, renting is definitely the way to go.

 

[waarmstrong]

Buying stuff in Bali, at least stuff that you cannot carry home in a suitcase, is not for the inexperienced.

 

[jstar]

I don't know the market in Surabaya well enough, but in Jakarta there is definitely an oversupply in apartments. Many people see it as an investment and try to rent out. Many are empty.

Obviously, if you know what you're doing and have a great location close to public transportation, a university, an international company, .... why not? Then your customers will be all these people who only want to rent.

 

[Zavia]

I too was turned off by the no ownership of the land for foreigners.
You can get the lease renewed with the government every 30 or 20 years, and according to people its guaranteed to be renewed and so on. As the saying so, if you have to ask, its not really yours.
Id never buy property nor invest in property here consequently. Hell the construction guarantees (one of the industries im in) is terrible, they arnt using the right waterproofing even!

 

[jstar]

But that's also because they general consensus is that a house will be renovated after 15 years or so. And renovation in this country means more or less a rebuilt.

Btw, the system you don't own the land (so like HGB), you will find in multiple western countries. The city owns the land and you own the apartment or house, with a (+) 80 year usage contract. The only disadvantage is that the closer you get to the end of the 'lease', the more iffy the sales (price) of the property becomes. And theoretically you'd have no right to extend, or they could up the price of a new lease considerably.

And Hak Pakai is of course a long term lease with an 80 year potential. Which is not that bad. (The government being involved makes it a bit more secure.)

 

[waarmstrong]

.... (The government being involved makes it a bit more secure.)

I had to laugh after just reading through the Prison raid thread. (You did intend that as a joke, Right?)

 

[brian@bekasi]

Btw, the system you don't own the land (so like HGB), you will find in multiple western countries. The city owns the land and you own the apartment or house, with a (+) 80 year usage contract. The only disadvantage is that the closer you get to the end of the 'lease', the more iffy the sales (price) of the property becomes. And theoretically you'd have no right to extend, or they could up the price of a new lease considerably.

This system of ownership is not dissimilar to the Australian Capital Territory (Canberra) where land is provided on a 99 year lease from the government. A system that worked well for many years.

However, I would suggest that the fineprint in the Indonesia legislation may be vastly different from the Australian laws.

 

[Bikerbule]

Thank you for all the replies, very informative.

 

[Teabag]

With the new regulations, which I don't fully understand, it seems it is now possible for foreigners to purchase apartments. So i'm thinking about putting some savings into an apartment in Surabaya. It won't be a new build.
Don't know anything about property investment here, so what are some potential problems?
Possible to lease out? via airbnb? or to another foreign worker?
Are apartments generally ok investments here? for about 5 - 10 years.

Hi Bikerbule

I'm one of those apartment 'owners' in Bandung. Me and my wife 'own' (around 7 corners...) 4 apartments in the city center. They range from 22 to 40 m2 and are located in new build buildings. There is a large swimming pool, fitness center and security in those houses, which can be used.

If you want to 'buy' for your own, stay yourself in it and hand it over, ones when the days have come, to a relative, then go for it. If you on the other side want to make a business by renting it out or a capital gain by reselling the objects, then welcome to hell !

The following information ist based on my own personal experience and may vary at different locations and with different persons involved, so here we go....

We 'bought' the flats new and after a 3 years delay, they were finally finished. We will use them in about 4 years as our home base and we wanted to rent them out in the meantime. This seems to become a total miss.....

First pitfall: We are based in Europe and have relatives in that City, close to our objects, which were ready to manage the rent out handling. Unfortunately their understanding of service quality or object and customer handling differs totally from what we understand, even my wife is Indonesian and should know how things run down there. With other words, a reliable remote operation of properties is hardly possible.

Second pitfall: In Bandung are more then 650 objects listed on booking.com. Many of them are hotels with 100 and more rooms, so we are facing not only a total oversupply, we also have the problem that we are not found by the people. Well the advertising platform is may wrong also, because no western goes to a city in Indonesia and chooses a privat apartment. So the customers are more the local ones and this leads us to the third pitfall...

Third pitfall: Price..... You have to invest a lot to get a good standard object and the rent out fee, which locals are ready to pay, is somewhere between nothing to 350'000 rupiah. This brings you to a 3 star level hotel. From that, you have to pay also the management fee for key handing over, the cleaning, the fee for the advertising on a (or several) internet platform(s), replace the stolen items (because of poor handing over processes...) and so on. In addition, the utilization is very low due to the oversupply from pitfall 2, so you end up in earning nothing, but you still have to pay the side costs.

Forth pitfall: Reselling of an apartment. The Indonesian society is not ready for apartments. They do hardly accept, that you have side costs to pay for an apartment and that you own only a part of the building which means, you can not do what you want in the public areas. So, to resell will be a challenge too.

I see it more as a place where we can stay later and also at our vacations. And for my wife, its a part of a culture thing, 'own' something in the homeland. The big problem is, if business and cultural feelings and a part of homesickness is coming together, than you found a recipe for a disaster. But that is another story....

Cheers
Teabag

Edit: I talk about Studios, one room only, with small kitchenette and a toilet with shower.

 

[cestpasmyjob]

22-40 sq m? A hotel room is normally 30 sq m or so - presume these are studios/ kos rooms?

 

[snpark]

22-40 sq m? A hotel room is normally 30 sq m or so - presume these are studios/ kos rooms?

Hahaha you must be new, lol, haven't you seen even some 30-40sqm apartments described as 2 bed? I have even been to friends with one of these styles (like Kalibata) where you can barely get a single mattress into the 2nd room let alone anything else, more of a 1 bed with a broom cupboard

But that's the sizes the developers make here - for the local market, one bedroom for parents, the broom cupboard for the baby, hey presto, 2bed apartment in a "community" development

Hence why all the mid market apartments targeted for middle class and expats are all empty, because no one here wants to buy, only rent

Hotel rates dropping, serviced apartment rates dropping, etc etc, even now a lot of people just use air bnb for one or 2 nights if they come on business

Has been said many times and above in detail, here is not a great place to buy a property, it is renters paradise at the moment

 

[cestpasmyjob]

eek! I did some property development with my in-laws in East Java about 15 years ago (cluster houses for middle class) which went well. They were about 70-80 sq m.

 

[Teabag]

22-40 sq m? A hotel room is normally 30 sq m or so - presume these are studios/ kos rooms?

Right, I talk about Studios, one room only, with small kitchenette and a toilet with shower.

Crown Plaza in Bandung is 35 m2 and Hilton is about 40 m2.

Those are both 5* hotels and the room rate for a western is about 1.2 millions, in low season or if you / your wife knows someone, then the rate is about 800k.

 

[Teabag]

eek! I did some property development with my in-laws in East Java about 15 years ago (cluster houses for middle class) which went well. They were about 70-80 sq m.

Today, they built in the middle of the cake in bigger cities only small apartments. They advertise it at 22 m2, in fact, you get only 17 m2, because they also count the balcony and half the width of the corridor in front of your door to your total room size.

I dont want to think evil, but I felt cheated the first time I saw it...

 

[snpark]

Plus the thickness (if you can call it that) of internal walls is also deducted