- Capital values and rentals continue to drop in the quarter
Despite the emergence of second COVID-19 wave, Colombo’s residential real-estate market saw the sales growth momentum begin in the third quarter persisting throughout the fourth quarter of last year backed by increasing investor confidence and the ease of buying, with developers prioritising sales over price.
Jones Lang LaSalle (JLL) in its latest ‘Colombo Property Market Monitor’ highlighted that the residential vacancy rate remained unchanged during the period since the beginning of the second COVID-19 wave in early October.
In particular, it noted that sales in affordable housing market continued to remain highly resilient, with ample liquidity in the market driven by the low interest rate regime.
In the quarter, two residential projects were launched in the segment, including the 45-unit Flemington 20 in Colombo 3 and the 300-unit housing project by Kelsey homes in Ja-Ela.
“Although face value of prices in the condominium remains unchanged, developers offered deep discounts to prioritise sales over returns. In the secondary sales market, apartments were sold at a significantly lower price than the market quoted price as a result of some private investors liquidating assets to tide over difficult macro-economic conditions,” JLL said.
A large stock of high-end residential condominium units are scheduled to enter into the market this year, including ‘The Suits’ by Cinnamon Life, Altair and Icon Galaxy in Rajagiriya.
In addition, Kelsey Homes in Kottawa in the affordable segment is expected to be completed by this month.
JLL stated that prices are currently on a downward trajectory in Colombo’s residential real-estate market with price growth further slowing down by 1.3 percent Year-on-Year (YoY) in the fourth quarter of last year.
In addition, the average net effective rent in the overall residential market significantly dropped by 20 percent in the fourth quarter compared to the third quarter of last year.
“Rents in the luxury segment largely remained range bound, however rents in the premium and affordable severely declined,” JLL noted.
It ruled out an immediate recovery in rentals in the coming months given the slow economic growth and softening demand from foreign expatriates aggravated by global travel restrictions holding companies to hold expat hiring.
According to JLL, primary price per square feet stood at Rs.68.66 in the fourth quarter.