Sri Lankan real estate industry is on a roll: Property buyers are flocking back to the market

Since the turn of the year there has been an increase in real estate activity by property buyers and sellers, according to Sri Lanka’s leading property portal LankaPropertyWeb. 

The company stated that a comparison between the number of visits to lankapropertyweb.com during the month of January in 2020 and 2021 showed an increase of 23% while leads generated to advertisers on the site increased by 20%. 

LankaPropertyWeb (LPW) also saw an acceleration in visitors by 22% and leads by 20% when compared with December 2020 and January 2021. According to the site, January 2021 saw the highest number of visitors to the site since the start of the pandemic. 

This trend seems industry wide as another property site, house.lk reported a 26% jump in its visits during January in comparison with December 2020. House.lk also reported an all-time high number of visits to the site in January of this year. 

Property buyers increasingly positive

With restrictions around COVID-19 easing and confidence returning to the market, property buyers are increasingly positive over closing sales since the start of this year. In fact, the recently published data by LankaPropertyWeb revealed that only 8% of its 63,250 advertisers had reduced advertised prices during 2020, with an average reduction of 11%. In some cases, these reductions result from the seller’s urgency to sell and further discounts being offered to buyers when closing a sale.

Meanwhile, 88% of property advertisers did not change their initial advertised price, while 4% of the advertisers increased their initial tagged price by 12%. This shows that despite the pandemic, the real estate market in Sri Lanka has remained stable last year.

High reductions in commercial property were seen by advertisers who reduced their property prices by 13% in the last year. This is mainly credited to the price fluctuations and the shift to working from home policies that many businesses have adopted now.  

Commenting on the market, Naveed Zaveer, Director at Menavid Realtors said, “There has been an improvement in the property market since December 2020, with inquiries being made. The opening of the Sri Lankan Airport on 21 January to tourists is also a positive step towards revitalizing the economy. We stay positive and hopeful that this will create a positive mindset in the minds of the investors, motivating them to invest further in the property market.”

Property searches

A study on people’s search trends revealed that last year Colombo ranked as the No.1 city in rental property searches. This was followed by Kandy and Dehiwala that ranked second and third, respectively. In 2019, Colombo ranked first, Dehiwala ranked second, Nugegoda was third and Kandy was in the fourth place in rental searches ranking. This shows that metropolitan areas are yet in demand in renting, irrespective of the pandemic hit.

In the 2020 sales property searches, Colombo ranked number one again, maintaining its 2019 position for the same criteria. Kandy and Negombo placed second and third respectively in the sales property search. The ranking in land searches revealed that Kandy, Kurunegala and Nuwara Eliya placed first, second and third respectively.

Overall, since January 2021, the positive sentiment towards real estate has been rising consistently among sellers and buyers. This was especially seen with the number of properties advertised on the site increasing by 54% in January 2021 when compared to January 2020. This is a 21% growth from last year’s December to this January, bearing evidence to the rising trend of advertising property online.

There was also a hike in land searches amounting to 55.8% in January 2021, when compared to last year’s January. This shows an increasing trend of people shifting to searching property online versus traditional methods. It is a significant improvement considering that January 2020 saw very little restrictions and impact because of COVID-19 when compared to the last month. 

According to the company, based on the feedback they have received from agents and property sellers, the market is seeing a significantly higher number of sales being closed since last month. Therefore, it stated that this would be the ideal time for buyers to finalise their sales and take advantage of the lower prices before they increase. 

Property seen as a stable investment

Over the years, property has been known to be a stable long-term investment. According to LankaPropertyWeb’s market report, during this period it has specifically increased investor confidence when compared with other investment options that have been generating low returns or seen as volatile. 

Sri Lanka Overall House Sale price has grown by 91% in the last five years, and 20% when compared to Q4 2019 and Q4 2020. The Weighted Average New Fixed Deposit Rates of Commercial Banks in December 2020 were at 5.07%.

Housing loans at 7%, the lowest in a decade 

Lower home loan rates could be attributed as another factor for the buoyancy of the market. Taking a loan now for Rs. 5 m for five years would save you an interest payment of about Rs. 0.4 m when compared to last year’s January. You would also be saving about Rs. 0.6 m when compared to January 2019. This is because of the low interest rates offered in a decade. 

With many banks extending housing loans from 7%, according to the Government’s directive, home buyers have shown a keen interest to take advantage of the current low rates.