Sri Lanka luxury property market under threat: OBG

Sep 28, 2015 (LBO) – Sri Lanka’s high end residential property market is at a possible risk as supply is set to overtake demand, a recent real-estate update by the Oxford Business Group said.

The supply of luxury apartments in the commercial capital could reach 6000 units by 2018-19, according to a recent report by the Research Intelligence Unit (RIU), up from 783 in 2009 and 2657 this year, the report quotes.

“In the premium residential segment, insufficient demand will be a problem,” Pravir Samarasinghe, chief executive of Overseas Realty said in the report.

“There is a maximum off take of 500 units a year in Colombo, and there are probably 3500 under construction over the next three years.”

The report lists several residential projects which are expected to be completed in the years ahead.

John Keells Holdings’s 850 million dollar Cinnamon Life waterfront project scheduled for completion in 2018 will include an 800-room hotel, apartment and office complexes, a convention centre and a shopping mall.

Colombo’s Havelock City mixed-use development is also expanding, investing some 130 million dollar to add another four residential towers and nearly 650 units.

Other luxury residential projects, such as the Astoria luxury condominium development, two 194-metre Shangri La residential towers and the 240-metre Altair skyscraper, will further add to stock in the city.

Though sales are steady, the update says the increase in the supply of top-end residential units in the capital could outstrip existing demand.

Quoting Pradeep Moraes, director and president of sales and marketing at Altair/Indocean Developers, it says nonetheless, sales could see the demand gap narrow over time as the economy gains momentum.

“The improved political and economic environment will drive many more people and businesses to come to Sri Lanka,” he told OBG.

Demand could also be spurred by wealthy Sri Lankans returning to cities in search of better accommodation.

“In the past there was an exodus out of town in search of larger properties, but there is a new emerging segment for rental apartments in the city,” he told OBG.

This in turn could boost sales, encouraging buyers to invest in upscale properties for residential rentals.

Currently, more than a third of premium residential sales are generated by Sri Lankans living abroad, while less than 4 percent of investments are made by foreign buyers with the balance coming from locally based, high-net-worth individuals, the update says.