OVER lychee Martinis at the Hu’u Bar in Bali’s hip and trendy beachside suburb of Seminyak, the chatter is decidedly British. Someone asks how Arsenal did at the weekend. Another male voice bemoans his physical distance from a good Yorkshire salmon run and a woman is excited at the prospect of her Prada bikini arriving the next day direct from Knightsbridge.

Welcome to the new-look Bali. These expatriates are among hundreds of Britons who have found paradise here in this Indonesian island by buying land and villas. A few live here year-round, but most flit in and out, letting their homes to a regular stream of tourists.

Business is thriving in Bali and the volume of land and villa purchases is substantial. Even after the bomb explosions in October 2002, which killed 202 people, property prices stayed firm. Moreover, the tsunami, which devastated many other parts of South-East Asia, did not affect Bali.

Property prices on the south coast, where 300ft cliffs afford spectacular views over the Indian Ocean, have increased by 20 per cent in the past six months with a few properties selling for more than $1 million. Nothing, it seems, can dampen the interest in Bali property.

Oliver Woods, 40, a former futures broker originally from Portsmouth, first leased a 16,145 sq ft plot of land here in 1992 and built a three-bedroom house on it. “It turned out to be a remarkable rental success,” he says. “We lived in it but let it in high seasons Christmas, July and August. I would say 95 per cent of Westerners who have bought Bali property are happy with their investment. The property climate is very good. Land here is still 40 per cent cheaper on average than Phuket). All the aspects that make Bali so special are still here in abundance: you only have to drive 30 minutes out of Seminyak and you are back to the untouched village life. In terms of profitability you are looking at rental income of 10 per cent per year with a capital appreciation of 20 per cent per year,” says Woods.

One big financial incentive that Bali has is a year-round tourist trade. There are wet and dry seasons, but temperatures remain constant. Christmas and New Year are in the wet season, yet they are the busiest time for tourism, catching the Australian, Asian, European and American markets.

Woods is soon to sell two three-bedroom pool villas at $350,000 (£190,000) each and will have two more four-bedroom pool villas available at Christmas next year ($625,000 each) through the agent Elite Havens. He was among the most recent Western influx in the 1990s, when expatriates snapped up villas and land. Many were old Asia hands: merchant bankers escaping burnout in Tokyo, IT gurus from Singapore finance houses, entrepreneurs with backgrounds in Jakarta and Hong Kong. They were seeking a magic mix of relaxation and investment returns.

Bali was, and is, perfect for both, as a result of its balance of modern infrastructure and untouched beauty, and its Western-friendly familiarity with tourism, service culture and the English language. The pull is strong but, as Woods says, buying in Bali is not for the faint-hearted. “Many people arrive here with no experience and have a go at buying on their own, and they usually get into trouble. You need as much help as possible,” he says. “It is easier than it was, but there are new regulations on building areas and a lot of the famous Balinese rice fields are protected under government legislation, so legally you really have to use a professional adviser and agent.”

Bali’s property market leader is Elite Havens, an expatriate-owned and run operation. Its director of sales, Matthew Georgeson, explained Bali’s bullish property run. “The market is roaring at the moment,” he says. “Property prices have risen steadily through the year and accelerated in some cases, mainly due to the increasing numbers of tourists. The Government recently raised its estimates of total visitor numbers twice. Occupancy rates for rental villas are running at 65 per cent with some at over 80 per cent, which is excellent for investor returns.

“Increased religious tension in Thailand’s south prompted buyers who previously viewed that area as a safer investment climate to cross-compare Bali much more,” says Georgeson. He estimates that about 15 per cent of Elite Havens’ potential buyers are British expatriates, based mainly in Asia and the Middle East. Most are looking for a three-bedroom villa with a large garden and a pool, for which they can expect to pay an average freehold price of about $350,000. “There is British interest in two of our star villas right now: Avatara, a four-bedroom villa in Canggu, and Villa Nyambu, a five-bedroom complex of three villas just north of Canggu,” he says.

Woods says that the other crucial factor (for rental returns) is good property management, which has only recently been available in Bali. “You basically have two options: oversee the rental side yourself, which is tough unless you are on the ground, or bring in the professionals,” he says.

Bali Homes Management (BHM) operates and represents some of the island’s most exclusive villas. Its director of developments, Ian Macaulay, says that the company “runs investment properties to the standard of a luxury hotel while maintaining the atmosphere of a holiday home”. He says that, increasingly, there is also interest in BHM’s “managed villa resorts”, especially clusters of villas with between five and fifteen villas and an integrated management system. “These villa resorts harness the economies of scale, minimise the headaches for owners and let them enjoy their lychee Martinis in peace,” he says. “In Bali, Martini time is very important.”

Avatara and Villa Nyambu are for sale through Elite Havens for $925,000 and $1.25 million respectively. Contact: Elite Havens, 00 62 361 731074, www.elitehavens.com For property management and marketing: 00 62 361 730668, www.balihomes.com

Explore Property

• Buying & Selling

• New Homes

• Overseas

• Interiors

• Investment

• Gardens

• Cool In Your Code

• Specials

• First-time buyer

Times recommends

• Second homes: credit crunch casualty or money-spinner?
• How I built my own sliding house
• Top 10 incentives for house buyers