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The Price of House and Land in Bali

A Breakdown of Building and Land Costs

The cost of buying land and building houses is inceasing rapidly all over the world to such an extent that many people cannot afford to own their own home. Here we look at prices being asked and what the actual costs should be. We also look at how costs can be saved.

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The increasing cost of buying land and building houses

Building a house can be a very expensive exercise. Budget blowout is very common and the final project cost can end up being far greater than the original plan.

It can be very traumatic. Once you've started it isn't easy to stop until the job is completed. It's a roundabout you can't get off and many people, when they finally do get to the end, will say “never again”.

People are paying far more for houses than they need to

The fact of the matter is that many people are spending far more than they should to buy or build a house, it is quite usual that people are spending more than twice what they should be paying.

As an example I have a colleague who has recently completed a three bedroom modern 2 storey detached house, 500 square metres of land, 225 square metres build area, 3x10 metre pool fully furnished has cost him US$130,000 (Rp1,250 million) all up. He knows that he could sell it tomorrow for around US$350,000 though he isn't planning to sell anytime soon.

How is this possible? Why is it that so many people are paying so much more for their houses.

Let us go back to some basics as a starting point. We have looked at this before but, with such rapid increases in prices it is probably time for an update plus some more detail.

The price of land varies widely in Bali according to the location and the demands of the person selling it. Of course foreigners cannot own land, it is illegal, and are well advised to not use the usual tricks to get around the law. The use of nominee to own the land, pretend loan arrangements, powers of attorney and locking up the land certificate are tactics to get around the law and are fraught with risk.

Land prices in Bali

Land is increasing in value to ludicrous levels as lunatics with more money than sense scour the island to buy anything that doesn't move. Much of this inflation is falsely created by real estate agents who wish to maximise their income and is eagerly supported by local people hungry for instant cash to buy that new car.

Even so land can vary from as little as Rp 40 million per are (an are is 100 square metres) in a country area to Rp300 or Rp400 million per are in prime locations. Getting land at the right price is a matter of hunting around.

Let us say that you are successful and buy a 3 area block for around Rp 180 million per are. A total of Rp 540 million or around $US57,000.

(Update October 2014 - these prices were quoted in 2012, in 2014 it is possible to buy land for Rp350 million or US$35,000 per are but the average is now (2017) around Rp700 million per are.)

House building costs in Bali

The Price of an average house

Building cost is roughly calculated on rupiah per square metre depending on how luxurious the building is. A very basic house that an average Indonesian would live in would cost around Rp 2.5 million per square metre to build and for this it would have a low quality tiled roof, batako and concrete walls with a rendered finish, wooden window frames, plywood doors, low cost white tiled floors, squat toilet and around 1,300 watts of power.

At the top of the scale there is no limit (if you like gold plated nasal hair removers and you wear ermine socks) but it is reasonable to assume that if you go the whole hog and make a complete piglet of yourself you will be paying as much as Rp 10 or 11 million per square metre.

So on our 3 are of land we build a house with 3 bedrooms each 4 x 3 metres, 2 bathrooms each 2 x 3 metres, a living room 5 x 4 metres and a kitchen 3 x 3 metres. Let’s not skimp so we add a verandah 3 x 2 metres, a laundry 2 x 2 metres, a store room 2 x 2 metres, a maid’s room 3 x 2 metres and a maid’s bathroom 2 x 1.5 metres. We now have a comfortably sized house equivalent to an average modern Australian house except it has an area for a maid. A total of 100 square metres. Which takes up only a third of the land so there is plenty of room for a garden.

Let us build this house at an average standard of quality with reasonable roof and floor tiles and wooden doors so we’ll pay a generous 5 million per square metre, a total of Rp 500 million for the house. We’ll also add a carport for about Rp 30 million.

We have to pay 10% tax on the building cost so we need to add Rp 53 million.

Total building cost is Rp 583 million around $US 61,000 which, with the cost of the land, is a grand total of Rp 1,123 million or about US$ 118,000. Note that the cost of the land is a major part of the expenditure.

Price of a cheap house

If we built the same house at very basic Indonesian cost and on a 2 area block of land (a bit cramped but you could do it) our cost would be Rp 360 million (US$ 38,000) for the land and Rp 250 million (US$ 26,000) for the building giving us a total of Rp 610 million or US$ 64,000.

Price of a luxury house

Now if we buy 4 are of land in a much better area where we pay Rp 300 million an are and we build a luxurious house of 160 square metres complete with stone facing on the walls, carved wooden bits, high quality tiles, wooden floors and one of those fancy french naughty bit washers we are looking at Rp 1,200 million (US$ 126,000) for the land, Rp 1,600 million (168,000) for the building, we can throw in a swimming pool for about Rp180 million and a fancy carport for say Rp80 million a total of Rp 1,860 million (US$196,000).

So total cost is Rp 1,260 million (US$ 133,000) for the land plus Rp 1,860 million (US$ 196,000) for the building and tax will be Rp 186 million (US$ 19,600) giving us a grand total of Rp 3,306 million (US$ 348,000) to live in the lap of luxury. Of course the sky is the limit but this can be regarded as an extremely reasonable lap (perhaps not Angelina Jolly’s lap but maybe Julia Roberts, eyebrows and all).

You will find that many people are paying considerably more than these prices for their place in paradise regardless of whether they are buying or building. I have come across cases where developers are charging their clients twice the land and build cost, a mark up of 100%, hardly customer service is it?

There are a number of key steps you can take to keep costs down much of which involves avoiding fees of various kinds. While some professional fees can save you a lot of heartache and worry there are many that can be avoided. Next time we'll look at how money is extracted from you without surgical intervention and what you can do to avoid it.

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Copyright © Phil Wilson June 2012
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