Indonesia’s New Treasure Island
Just a few years ago, exploring the island of Lombok, Bali’s eastern neighbour, took a lot of time and patience. You could travel by boat – several hours across the Lombok Straits and there were also a limited number of flights, a quick 25 minutes in the air and often half a day of travel with airport delays, traffic, and potholed roads that taxis shared with horse-drawn carts, goats, and the occasional wedding procession.
The island’s beautiful rolling green hills, coconut groves and white sand beaches offer a different topography from Bali, but Lombok seemed destined to offer similar nuisances, with poor roads and infrastructure and an airport that was unable to handle the growing volume of passengers.
But much has changed over the last few years. The Indonesian government has thrown its weight behind Lombok, building a new international airport and investing US$200million in infrastructure. And with more of the island now accessible to visitors, companies such as Private Sanctuary Limited are setting their sights on Lombok’s beautiful southern coast where affordable land and increasing tourism offer great investment potential.
“The biggest lesson learnt from Bali is the infrastructure problem,” says Daniel Paetzold, co-founder of Hong Kong-based Private Sanctuary. “Lombok is a pilot project for sustainable tourism. The airport and the new roads take pressure away from the urban areas.”
The first area to benefit from the new airport and roads has been the southern coast, home to a dramatic coastline of coves and beaches and mountain ranges.The coast has long been popular among surfers, but is also a great spot for diving with plenty of manta ray and hammerhead sharks to see.
Previously difficult for visitors to access, the coast is now easily reached via a new highway from the airport. Lombok’s new airport now receives direct flights from Singapore and Kuala Lumpur, and Cathay Pacific is also considering launching a route from Hong Kong.
Currently, there are not enough beds on the island to support increased arrivals, but this is set to change. The southern coast will soon be the site of The Mandalika Resort, a large-scale, master planned resort being developed by the Bali Tourism Development Corporation in conjunction with the Indonesian Government. Otherinternational resorts, such as Club Med and the Marriott are developing properties here too.
For now, development is in the early stages and there is plenty of land still up for grabs. “The situation at the moment is mainly homestays,” says Tobi Doeringer of Private Sanctuary. “There are a few boutique hotels with white sand beaches.” The founders of Private Sanctuary have been involved in several boutique resort and villa developments in Southeast Asia, including luxury villa projects such as Song Saa in Cambodia.
But since 2012 the founders have focused on the island of Lombok. Their first project, Coconut Creek, is a private estate of individual luxury villas in Selong Belanak, South Lombok that has already sold out.Their newest villa project, MandalikaView, is a private estate of 17 luxury villas located on prime land, minutes away from Kuta, the main hub of the south coast.
The project will overlook the Mandelika Resort and golf course and offer land plots with turnkey solutions to investors, including architectural design, operation and management services, and all for a fraction of the price they would pay in neighbouring Bali. “Right now land prices are about a tenth of Bali’s,” says Doeringer. “On a prime plot of land you can buy and build a villa for US$300-500,000. In Bali you pay over US$1.5million. Prices for larger beachfront plots range from around US$70 to US$180 per m2, while smaller prime oceanview plots can range up to US$120 per m2. The area is also proving attractive for investors looking to develop land plots into destination villas and boutique hotels.
Paetzold says returns on private villas range from 15% to 20%, including management fees, while returns on boutique resorts are much higher. “You make about 80% of the rental you get in Bali, but the land costs a tenth of the price so you have a much higher return.” Private Sanctuary expects to see a significant upswing in land prices in the coming years. As a result of improvements to infrastructure and increased passenger arrivals, land values on the south coast increased 25% to 40% in the first half of 2014 alone.
The developers’ confidence in Lombok is also rooted in overall confidence in Indonesia. The country’s economy has been growing rapidly and its property market has followed suit. Indonesia’s residential property price index (14 major cities) rose by 7.4% during the year to end Q1 2013, the highest year-on-year price increase since Bank of Indonesia began publishing data in 2008.
Moreover, Paetzold says, Indonesia presents less risk when compared with other developing countries in Southeast Asia due to its relatively stable democratic system and largely domestic market. Indonesia is a very independent country and most of its gross domestic product is internal. The country is sitting on a wealth of minerals, a wealth of population and a wealth of land.