According to the recently released House Price Index of LankaPropertyWeb that is based on asking prices for Q1 of 2022, the overall selling prices of apartments have soared by 36.08% from Q1 of 2021 while the overall residential land prices of Sri Lanka have reduced by 29.77%.
Further analysis of the Colombo apartment prices showed that average prices of a 3 bedroom unit have increased from LKR 49.93 million in Q1 of 2021 to LKR 69.14 million in Q1 of 2022 accounting to a 27.28% increase in just over a year. Meanwhile, the average value of a 4 bedroom house in Colombo had reduced by 5.08% between the first quarters of 2021 and 2022.
A study on the foreign visitors to the LankaPropertyWeb website revealed that over the past 3 months, the foreign traffic increased by 20.6% especially after the government started floating the Rupee in the open market. Most visitors are from the United States (USA), UK, Australia, Canada and UAE and many have been on the lookout for houses for sale in Colombo followed by apartments for sale in Sri Lanka.
The search behavior patterns of these foreign visitors to LankaPropertyWeb also revealed that the highest number of searches for properties were in areas such as Colombo, Negombo, Jaffna, Kandy and Galle. This indicates similar local buyer patterns, where a high number of searches are for the suburbs away from the hustle and bustling city life.
With the pandemic and economic instabilities, the average USD value against LKR from 2020 January to 2022 March increased from LKR 180 level to LKR 295. This is a 64% rupee value depreciation in just 2 years. While this has negatively impacted the cost of living in Sri Lanka, for expats, this has opened an opportunity for investments in the country.
Rupee value depreciation over 6 months (Source: Central Bank of Sri Lanka)
House Price Index 2021 vs Foreign Traffic
LankaPropertyWeb Research further analyzed the changes in property prices over the past year in relation to the foreign traffic hike. According to the House Price Index over the past 4 quarters of 2021, the overall selling prices of houses increased by 19.3%. The average 4 bedroom house that was priced at 45.17 million in Q1 was recorded as 53.9 million in Q4. Meanwhile, the value of apartments during the same period increased by 15.5% while land prices saw a reduction of 7.3%.
Given the increase in construction prices and US dollar value fluctuations, property prices are expected to increase further in the future in LKR. The Central Bank’s housing cost measure ‘Housing Index’, showed that house construction costs had risen by 909 points in Q2 of 2021 from Q1 of the same year. However, for expats, investing in property in USD during this time proves to be one of the most profitable investments.
Commenting on the current local market trends and buyer behavior, Bimasara Gamage, Managing Director of BIMSARA – Safetynet (Private) Limited said, “Individual house constructions are on the decline with the escalated construction costs and now a majority tend to show a reluctance into building. But the demand for apartments is expected to grow and may even surpass the demand for houses, given the current situation.”
A study of the House Price Index further showed that the demand for houses and apartments in Q4 of 2021 had increased by 22.53% and 17.68% respectively. These were an all-time high compared to the previous records with the selling price of a 3 bedroom apartment unit in Colombo rising by 24.11%.
Most of the visitors are looking for apartments between Colombo 02 to 08 and the demanded price range is LKR 30-60Mn. Apart from the greater Colombo area Dehiwala, Mount Lavinia, Piliyandala and Battaramulla are highly regarded by the buyers who search for apartments between the price range of LKR 20-50Mn.
With developers offering monthly installment basis payment plans in partnership with commercial banks in Sri Lanka, buyers can now invest in property without having to pay in full at once.
For more details on the invest options available in the real estate market, contact us on 011-7167 167.