As the owner of two rental villas in Lombok we’re seeing first-hand the rental yields that are achievable in this emerging market. In the time we have been operating, the yields on our properties have certainly exceeded our projections.
This got us asking ourselves why? Why are the rental returns in Lombok so good? What makes this market unique? And why are the rental returns in Lombok generally higher than neighbouring Bali and other competing property markets? There’s some fundamental reasons behind this and we’ve outlined below why high yields are still so readily available in this market. Read on to find out more.
1. Low buy-in cost
You can buy a beachfront 2 bedroom villa in Lombok for under $400k USD. Tourists do pay international room rates for properties such as this. Compare that buy-in cost to other markets (even neighbouring Bali) where a comparable property is much more expensive but room rates are similar then you can see why the yields are high in Lombok. Low buy in cost + high rental rates = high yield
2. Lack of supply
There is a lack of quality accommodation on the South Coast of Lombok. Tourism is increasing quickly, new flight routes are being added and the MotoGP is planned for 2021, but new supply in the pipeline is lacking. We expect this undersupply to benefit villa owners for many years to come.
3. A year-round tourism market
Although Lombok does have a peak season there is no true ‘off’ season. Tourists from all over the world arrive year round to Lombok, as opposed to say a beach destination in Europe or Australia where tourism is highly concentrated to the summer months. Our first guests have included visitors from the US, South Africa, Sweden, Australia, Germany and Malaysia Occupancy rates of over 80% are the norm for well managed properties.
4. Limited access to finance
Finance in Indonesia can be difficult or expensive to obtain and this keeps a lid on supply and allows cash buyers to take advantage of investments that generate plenty of income.
5. Proximity to Infrastructure
Lombok has an international airport located close to the most popular areas for villa investment. Roads, electricity, internet and water supply infrastructure have all improved drastically over the last few years.
6. Cheap running costs
Just like the cost of living here, property management, staffing and building maintenance expenses are far cheaper in Indonesia than other countries. Meaning you have internationally driven revenue and locally driven costs.
We recognise however that this opportunity is likely to be brief and will mainly benefit early adopters as these high returns will be normalised over time by increasing property prices. For example would you prefer to buy in Seminyak today or have bought 15 years ago?
For example; if you can pick up a property today for $300,000 that generates a 15% net yield (or $45,000 per annum) grow that revenue over a 5 year period to $60,000 and sell on for a more normalised yield of 8% net in the future your property is valued at $750,000 and has paid you a return of between 15-20% per annum during your ownership, leaving you with a return of over $1,000,000 from your initial $300,000 outlay.
So if you are looking for a holiday investment property that drives you strong returns along with the opportunity for capital growth, please get in touch or browse a small selection of our listings here.
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