Bay Post-Moruya Examiner

UAE, Turkey, Thailand and Indonesia: Looking for an investment leader

Alex Shtefan, founder and owner of Alex Villas Group. Photo supplied.
Alex Shtefan, founder and owner of Alex Villas Group. Photo supplied.

This is branded content for Alex Villas Group.

In the ranking of the most promising regions of the world in terms of real estate investment, the balance of power is changing.

In recent years, traditionally popular Turkey and the UAE have been displaced from the podium by Asian countries - and Bali takes the "gold" in the race.

Alex Shtefan, the founder of the development holding, Alex Villas Group (one of top three developers in Bali) told us about it.

For an investor planning to preserve and diversify capital through the purchase of foreign real estate, assessing the attractiveness of a particular region is critical.

Capital migration

Global phenomena such as a pandemic, regional wars, and sanctions confrontation between large countries cannot but affect the migration of capital.

People move to new countries, transport their businesses there, and transfer their money. This is especially noticeable in real estate investments.

In 2022 to 2023, many realtors recorded a significant increase in investor purchasing interest in resort real estate in different regions of the world: the EU, Turkey, UAE, Indonesia and Thailand.

In the most popular locations in the Middle East and Asia, the demand for investment property has increased exponentially.

Investment in the residential sector in the Asia-Pacific region is gaining momentum, with investors diversifying their portfolios and investing not only in the traditional office and retail segments, but also in residential, as it provides more stable cash flows for daily rentals.

For example, in our holding, Alex Villas Group, sales of villas and apartments in 2023 increased by almost 30% compared to 2022.

And, by analysing demand in the first quarter of this year, I do not rule out that by the end of 2024 the sales growth rate will be even higher than last year.

UAE, Turkey, Thailand and Indonesia: Looking for a leader

The most interesting thing begins when you try to assess the market situation in each country separately a little more deeply.

I speak about regions where real estate can provide a stable income.

For example, let's take an entry point of $169,000 to $200,000 and consider Turkey, the UAE, Indonesia and Thailand markets.

Here we need to take into account not only the level of profitability, but also the payback period of investments, as well as the characteristics of the tourist flow, if we want to receive a stable income from the purchased property.

In addition, it is worth taking into account the right to obtain a residence permit or citizenship in one country or another, the nuances of legislation and the tax burden.

And this is where the surprises begin. For example, a comparison of the level of profitability of housing from daily rentals shows that Bali gives a good head start to its competitors.

In Thailand it is 8 to 14%, in the Emirates it does not exceed 6%, in Turkey it is 3 to 4%, but in Bali it reaches 15 to 17%. Indonesia also leads in terms of the climate most favorable for tourist traffic.

While competitors' high season lasts 5 to 7 months, in Bali it lasts the whole year round.

In terms of the payback period for real estate in these locations, the situation is worst in Turkey. There, on average, real estate pays off in 10 to 15 years.

In the Emirates and Thailand, the same indicator is somewhat more attractive - 7 to 10 years and 5 to 10 years respectively. But Bali won here too with only 5 to 7 years.

Now, for example, the situation in the Dubai real estate market is not very good: people invested one and a half to two years ago, but now they cannot resell due to low demand on the secondary market.

This situation could have been avoided if real estate sellers had created an action plan for investors to build capital.

As a developer, we see our task not only in selling a villa or apartment to a client, but in creating an algorithm of actions for them - when to purchase housing, and when to leave the deal, how much the property will cost and how long it will take them to resell it.

I will give a couple of cases of Alex Villas Group investors. Our company builds villas and apartments in Bali.

In one of our complexes, a client bought a townhouse with an area of 76 m2 for 150,000 dollars in the spring of 2022 at the initial stage of construction.

One year later, just before the completion of the residential complex, the client sold the finished property for $230,000.

Our company sold another similar townhouse in the interests of another client already after the commissioning of the complex, as a ready-made business that now brings in $2,500 per month in net income, and it cost them $278,000.

Who attracts investors and how

Of course, all of the countries listed have their pros and cons.

In Turkey, in particular, there are restrictions on short-term rentals by law, requiring Airbnb permission; in other countries there are no such obstacles.

In the Emirates, there are considerable costs for maintaining real estate, but there is no rental tax. In Thailand it is much more difficult to obtain a residence permit than in other countries.

The situation in Indonesia is the most favorable. This is due to the policy of local authorities aimed at attracting investors and tourists.

In 2023, for example, the country launched a long-term golden visa program, which led to a number of international companies opening offices here.

Judging by the pace of residential and commercial development, Indonesia may soon become a serious competitor to China and India.

Despite the low inflation rate, real estate prices here grow annually by about 15-20%. As for profitability, it is one of the highest in the world.

Another factor that makes Indonesia more appealing is the large-scale infrastructure projects announced in the past few years.

This includes the construction of a new airport for 100 million passengers annually, a Formula 1 track, and an amusement park from Paramount Pictures with themed areas, a water park and other entertainment facilities.

There is no doubt that all this will become another powerful point of attraction for tourists.

The rapid growth of the tourism industry, which is observed in the Asian region in general, and in Bali in particular, suggests that an investor interested in purchasing overseas property should pay special attention to the island's market.

This information is of a general nature only and should not be regarded as specific to any particular situation. Readers are encouraged to seek appropriate professional advice based on their personal circumstances.