Condo sales at zero, hopes to rebound
COVID-19 comes at a time the economy is on a slowing trajectory with the apartment market hit badly after record level condo prices and sales in 2018. Analysts say this outbreak will contribute to sharper but temporary drags on this market.
In the mid-term (the next 12-24 months), weaker economic conditions and slower growth in employment, income, wages, and GDP could come faster than anticipated and begin to act as counterweight to the demand.
The Business Times found out that in Colombo and the suburbs, more than 60 apartment projects have stopped or into a downturn in the industry.
The immediate future affordability and sentiment for condominiums have been highly impacted by the virus’ spread. “The affordability is impacted by the cash crunch and for the next two quarters, the sentiment will also be impacted,” Rohan, Parikh, Managing Director, Iconic Developments Pvt Ltd told the Business Times in a telephone interview.
This is the time that highly leveraged builders and those who depend on pre-sales and refinancing will most definitely fall. According to Mr. Parikh, those in the affordable luxury living segment will stand but apartments in the mid-market and super luxury levels will be in trouble. “We see a drawing up of demand in the ‘sensibly priced products’ because we saw two to three continuous shocks during the past year,” he said. He mentioned the political stability during the past year, the Easter Sunday attacks and now COVID-19. “Each time the industry finds its feet, we are faced with fresh challenges,” he noted.
Mr. Parikh added that in the short-term apartment prices will get adjusted as builders will try to get rid of the inventories.
Another prominent builder said that low inventory should continue to power purchase interest and sustain upward pressure on home prices.
He added that there will definitely be short-term volatility in the condominium market, medium-term consolidation and definitely long-term buying.
Premalal Brahamanage, Co-founder and Group Chairman of the Prime Group, noted to the Business Times that in the aftermath of this pandemic, buyers will be forced to look for a ‘real’ asset. He pointed out that in that time, the demand for apartments will arise. He pointed out that last year and so far this year no new apartment complexes have been started. “There are no new suppliers during the entirety of last year and so far this year. So in time to come I see a shortage of apartments. Also buyers will want a known brand,” he said.