Residential land prices surge 30% in 3Q leaving many first-time buyers by wayside

• Land prices jump as much as 30% in 3Q
• Real estate sector accounted for 5.8% of overall economy by end-2021

The prices of residential lands in Sri Lanka are soaring to what appears to be unsustainable levels amid strong demand, leaving many first-time buyers by the wayside or making them wait longer before they could afford basic housing.

According to Charts.lk, a statistical analysis platform, Sri Lanka’s home land prices have jumped by as much as 30 percent in the quarter ended on September 30, 2021, from a year ago. However, this came as a moderation from over 40 percent surge in prices seen in the June quarter but the highest since little over two years, when the prices rose by similar levels back in June 2019. 

Sri Lanka’s housing and broader real estate market remained red hot, despite the pandemic-related restrictions and was among the few sectors in the economy, which staged a quick rebound since the brief setback it suffered during the lockdowns during the initial outbreak of the virus.

The broader real estate sector, which accounted for 5.8 percent of the overall economy by the end of the 2Q21, expanded by 5.5 percent from a year ago levels, reflecting that the conditions mostly favourable for housing such as the lowest interest rates and growing hunt for shelters by the aspiring middle-income class kept the country’s housing market hot, despite the pandemic-induced restrictions.  

Sri Lanka capped the housing mortgage rate at 7.0 percent fixed for five years since last December, to improve home ownership in the country, making good on a campaign promise by the government. 

Referring to the price data from LankaPropertyWeb, the leading online portal which lists all types of properties, Charts.lk said the price surge indicates the shift in money towards safe assets when the economic conditions became weaker, due to the lingering pandemic. Lands and other real estate offer good investment opportunity when the mortgage rates are at their historical low levels, as their values appreciate significantly.  

However, the recent pace of price increases in residential land prices could be an ominous sign for many first-time buyers, as they could either be left out or would have to wait longer before they could afford their basic housing needs. 

Citing LankaPropertyWeb, Charts.lk said the annual growth rate in the residential land prices in the Colombo city has risen by around 3 percent while the prices in the Western province, sans the Colombo city, have grown by 14 percent. 

Colombo features among the cities with the highest property prices in the world.