Colombo residential land prices climb, while luxury condo sales remain high
Residential land values of Colombo have risen by high double-digit rates in the second half of 2024, while high-priced condo deals increased in the third quarter, separate data show.
Prices and purchases have been rising in an environment of falling market interest rates accompanied by an easing monetary policy cycle (two policy rate cuts adding to 75 basis points in 2024) and healthier macrofinancial conditions. The average weighted prime lending rate of commercial banks has dropped to 8.86 per cent in January from 11.91 per cent in the same month in 2024.
The banking sector exposure to real estate is high — more than 14 per cent of total loans and advances. Commercial Bank alone, has reported it wrote off Rs. 2.95 billion construction sector loans in 2024.
Banking sector loans to construction including residential real estate, was near Rs. 1.6 trillion in the second quarter of 2024. The CBSL noted with concern last year that pricing of properties — housing and condos — is “irrational’’, referring to asking prices.
The second half 2024 ‘Land Valuation Indicator’, based on Government Valuation Department data and compiled by the Central Bank of Sri Lanka, shows a 9.9 per cent increase in residential land values in the second half versus the year before. The increase in the first half was 8.5 per cent. Real estate listings online reflect prices in Colombo.
The ‘Land Valuation Indicator’, also shows that commercial land values climbed by 9.4 per cent in the second half (8.5 per cent in the first half), and industrial land value increased by 3.9 per cent on year (3.7 per cent in the first half).
In Colombo District, the land value index covers Colombo, Kolonnawa, Thimbirigasyaya, Kaduwela, Seethawaka, Moratuwa, Dehiwala, Ratmalana, Sri Jayawaradanapura Kotte, Maharagama, Kesbewa, Homagama, and Padukka.
Separately, the CBSL’s ‘Condominium Market Survey’, involving 14 developers, shows an increase in deals in the Rs. 50m to Rs. 75m range and those below Rs. 25m. Sales of condos above Rs. 75m fell. As usual, resident Sri Lankans were the buyers (for occupation and as investment), although deals by foreigners ticked up slightly in the third quarter. Most Sri Lankans funded the purchases themselves.
Apartments in the Rs. 25m to Rs.50m price range made up more than half of the sales. Those exceeding Rs. 75m accounted for 10 per cent, although a year ago, the category accounted for a mere 4 per cent.
Pre-sale deposits and bank loans were the biggest sources of funding for condo builders. Some online listings show an 849 square foot, two-bedroom apartment in Colombo 7, priced at Rs. 75m, or Rs. 88,339 per square foot.
Most condo sales were in Colombo district, (49 per cent of the total), followed by the Gampaha and Kalutara districts. The ‘Price Index for New Condominiums’ shows a slight drop from the previous quarter, but has increased by 17.8 per cent from the year before.
A separate barometer, the ‘Asking Price Index’ for land in the Colombo district climbed significantly by 23 per cent year-on-year in the third quarter of 2024. Land prices increased by 4.6 per cent from one quarter to another.
In the ‘Land Valuation Indicator’, the residential, commercial, and industrial parts increased at a slower pace from the first half. The increase was highest in the residential land component.
But the increase in residential, commercial, and industrial land value is far lower compared with the second half of 2021, when the percentage rise of industrial land shot up above 20 per cent, and that of residential and commercial scaled above 15 per cent, the index shows. Industrial land value increase has tumbled to below 5 per cent by the second half from above 20 per cent.
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