Are we in a real estate bubble in 2024 in Bali?
There isn’t a Bali’s real estate bubble, but we are facing some of the toughest competition for daily rentals in Bali’s history. The threat isn’t a bubble, but a series of microeconomic events that may result in lower-than-expected revenue by the end of 2024. To understand this better, let’s revisit 2022.
Bali experienced a two-year lockdown from 2019 to 2022, which we referred to as “the worst thing to ever happen to Bali tourism.” This period had a profound impact on our company. According to the data platform Statista, Bali saw 6.28 million foreign visitors in 2019. However, by 2021, that number plummeted to just 1.07 million, eventually dropping to nearly zero, with only 20,000 visitors in 2022.
Emergence of a New Market During the Pandemic
Despite the airport closures and a significant drop in short-term rentals, a new market emerged. Digital nomads, wealthy Russian and Ukrainian war refugees, and expats began to settle in Bali. Some even started development companies, purchasing affordable land and hiring local contractors to build apartments and villas. When the pandemic ended, a surge of visitors arrived in Bali, driven by “revenge travel,” including those with long-term plans.
The Rise of the Semi-Resident Community
Driven by displacement from the Ukraine war, Bali saw a surge in Russian residents, reaching over 100,000. Co-working and co-living spaces thrived, and entrepreneurs established businesses in Bali. This community absorbed numerous villas and properties, offering long-term, upfront rental payments.
The Shrinking Long-Term Rental Market
By November 2024, the long-term rental market (6–18 months) was shrinking rapidly, potentially disrupting short-term rental prices. As of August 2024, there are several indicators of this market decline:
Noisy Marketplace
Rumah123, the largest website for long-term rentals now only lists expensive options, yet the inventory—about 85,000 listings—continues to grow.
Decreasing Search
Bukit Vista Website, ranked fifth for “Bali long-term villa rental,”. We’ve observed a drop in long-term rental inquiries, while offers from owners are increasing.
Insight from Round Table Discussion
Our Russian developer clients have observed that there are fewer Russian residents this year compared to last.
Proxy Indicators
- Tourism Department Data: The balance between arrivals and departures suggests a shift from residential to tourism travel, unlike last year when arrivals significantly outnumbered departures.
- Motorbike Rentals: Partners report fewer long-term rentals since April, with only short-term rentals being in demand.
- Buckwheat Sales: Sales, a proxy for the Russian resident population, have dropped since December 2023, with a slight recovery in July.
Implications for Short-Term Rentals
Currently, short-term rentals have not been affected by this trend, as many long-term rental owners remain either in denial or hopeful about securing new tenants. However, financial pressures are likely to push these owners to convert their properties into short-term rentals in the coming months. This increase in supply, combined with the addition of newly constructed properties, is expected to flood the Bali vacation rental market. While demand, as indicated by rising airport arrivals, continues to grow, the surge in available properties will likely affect daily rental rates.
By closely monitoring these trends and adjusting our strategies, we can navigate this competitive environment and continue delivering exceptional service to our clients and guests.