A recent survey conducted by LankaPropertyWeb.com and the Real-estate Intelligence Unit (RIU) indicates that the majority of Sri Lankans prefer to invest in real estate, as opposed to the stock market or bank savings.
In one of the most detailed ground surveys carried out about the Sri Lankan real estate sector, 44.1% of users said that they prefer to invest in real estate as opposed to the 33.9% who preferred to invest in fixed deposits and 22% stating their allegiance towards investing in stocks and trusts.
Travel time and location: Crucial factors for property selection
When investigating into users’ psychographic behaviour relating to property selection, the travel time and the neighbourhood locality were identified as the two most crucial aspects sought out, prior to purchase. With the build-up of traffic congestion over the years, reaching the metropolis with minimal time is the core objective of the working community. Additionally, for the middle and upper-middle class communities particularly, secure neighbourhoods play a vital role when choosing living abodes due to family expansion plans.
Increases predicted in overall property market and prices
The survey also revealed that 58.3% anticipated the property prices to consistently increase in the future. This prediction is affirmed by the National House Price Index maintained by LankaPropertyWeb.com, whereby over the past four years the average apartment and house prices have steadily escalated in Sri Lanka.
With a 42% increase in apartments and 41% peak in house pricing, it seems that this is a nationwide trend. However, taking only Colombo city into account, the increase was hovering at 23% thus indicating a much more moderate increase within the metropolis when compared to the rest of the island. This could be due to the average house price in Colombo being nearly 2.5 times higher than the national average.
Online wave presents better prospects for buyers and developers to find/sell properties
The survey also revealed that for the urban property seeker, online mediums have proven to be far more effective when identifying potential properties, with newspapers being voted in as the close second.
Thirdly, users also stated that word of mouth of family/friend/acquaintance recommendations also proved to be quite effective in their search for suitable properties. Property developers surveyed also indicated that they plan to focus on digital as their main selling channel in future.
These findings were reaffirmed by Daham Gunaratna of LankaPropertyWeb.com, who also noted that their site has seen a significant increase in the number of published ads along with site visitors in the last few years, with their current ads tally surpassing both print and other digital media.
Developers predict oversupply of apartments
With regard to the debate on oversupply of the apartment market, 64% of the developers’ response to this question was that they do predict an oversupply in future. However, some also foresee the market settling in to equilibrium, propelled by the expected buoyancy that comes through demographic and economic stability.
Commenting on these findings, RIU CEO Roshan Madawala states that the number of available apartment units is expected to top 10,000 by 2020 at the top end of the luxury apartment market. Commenting on the sustained upturn in the apartment market, Madawala noted that “while RIU has been monitoring the real estate market in Sri Lanka now for over a decade, we had to in fact revise upwards our initial forecast for supply as well as land prices due to continued strong demand which has been sustained over the past seven years.”
Interestingly, the survey also revealed that majority of the respondents currently occupied their ancestral homes, whereby 58% were looking to buy a piece of property, in the short to medium term.
Commenting on the results, Madawala said that “multifarious factors continue to exert upward pressure on the market. These include demographic and life-style changes, overall optimism on the future of the market, tourism, rising interest from foreign investors and buyers, as well as increasing number of non-resident Sri Lankans (NRSLs) entering the market.” He added that the latter could number as high as two million world-wide.
The full report, which includes the results and analysis for 20 survey questions can be downloaded from www.riunit.lk and www.lankapropertyweb.com/publications
Madawala will also be participating at the RIU Sri Lanka Property Fair (London) that will take place from 7-14 October. He will further elaborate on these findings and brief investors based in London, about Sri Lanka’s property investment opportunities, at this forum.