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Thursday, June 2, 2011

Property prices to double next five years - Report

By Athraja de Silva

Supply side growth of high end residential and commercial properties in the country’s capital Colombo will be sufficient to provide for less than 50% of the projected demand during the next 5 years, and this meager provision could lead to a doubling of property prices, a NDB Stockbrokers report on real estate states.

The report pointed out that the demand for property will rise amidst income growth via economic boom, low interest rate environment, foreigners seeking retirement destination, return of expatriates and closeness to regional economic super powers.

“Post-war set up has given Sri Lanka a great opportunity to enhance per capita income levels. The country is well positioned to enjoy a sustainable economic resurgence over the next few years,” the report noted.

According Sri Lanka’s GDP growth estimate of 8%, it is expected that the average household income of the top 20% population to double from Rs 98,575 recorded in 2009/10. The report also pointed out that the low-interest rate environment prevailing in the country since 2009, is likely to revive property demand from 2011 onwards.

“We anticipate the inflation and interest rates to remain at moderate levels over the next few years, although supply shocks could push inflation up from time-to-time,” the report said.

It also noted that the re-starting of the Colombo Development Plan by the government which was drafter in 1999 (and later abandoned) too will directly influence property prices to rise.

“We estimate the demand for high-end residential property in Colombo to be in the range of 10,000-20,000 units over the next 5-10 years. This is in comparison to the demand of around 2,000 over the last three years. A similar growth in demand is expected for commercial property in Colombo,” the report points out.

It further pointed out that the supply of high-end commercial property has been marginal over the last few years, as the present projects in the pipeline does not indicate a substantial increase in supply over next 5 years.

The report also noted that companies who have large land banks in key Colombo locations could be beneficiaries of the projected real estate uptick, as they could develop large scale projects with high profit margins.

source - http://www.dailymirror.lk/