Colombo land prices accelerate in second half

• But still remain muted compared to recent highs 
• Residential land prices record highest annual increase

Colombo land prices continued their climb during the second half of 2020 as prices of lands used for residential, commercial and industrial purposes re-gained steam.

Land Valuation Indicator (LVI), the only gauge in use to measure the direction of land prices in the Colombo district rose by 4.6 percent in the second half of 2020 from the same period in 2019. 

The LVI indicator was at 145.2 by the end of December 2020, up from 138.8 at the end of 2019 and 141.6 at the end of the first half of 2020. 

Despite the recorded increase in the LVI in the second half of the year, the pace at which land prices grew decelerated to less than half when compared with the 10.3 percent increase recorded in the same six months in 2019 on a year-on-year basis. 

However, in a sign that land values are picking up again after the end of pandemic-triggered lockdowns, the semi-annual percentage increase—the percentage change of the LVI in the second half of the year compared to the first half of the same year—accelerated to 2.5 percent from 2.0 percent. 

In any case, the LVI measured by Central Bank’s Statistics Department showed that Colombo land prices were nowhere near the prices seen during the second half of 2018, from which level the price increases have been decelerating on a consistent basis. 

During this period, land prices rose between 15 and 20 percent. 

“However, the percentage level of increase of LVI was in line with the declining trend observed over the recent periods,” the Central Bank stated. 

Another notable development in land prices is that although all sub-sectors such as residential, commercial and industrial contributed to the overall increase in LVI, residential land prices recorded the highest annual increase of 4.7 percent, followed by industrial and commercial. 

This defied the earlier expectation that the flow of people to Colombo from suburbs and rural areas would slow down in the aftermath of the pandemic as it created new conditions for working, education and living which could be made possible remotely using technology. 

The fact is that due to easy access to almost everything, people are still attracted to urban areas, particularly to the Colombo district, despite all its hassle in terms of congestion and high cost of living. 

This also demonstrates the fundamental failure in the Sri Lankan governance structure, where most of the things being decided from the centre, and thus making a stronger case for a decentralised structure, a highly politically contentious issue for decades.