Port City will be game-changer for Colombo’s real estate market

By Nishel Fernando

Land prices in core areas of Colombo City ( Colombo 1,2 and 3) are likely to peak this year on the verge of Colombo Port City land being released to developers later this year, said JLL Sri Lanka, MD, Steven Mayes.
He was speaking at the PropertyGuru media roundtable discussion yesterday on the first-ever Asia Property Award to be held in Sri Lanka this year. Meyers said, “The launch of Port City land sales which is expected later this year, will be a bellwether for the general market in terms of land prices.”

Speaking to Ceylon FT, he added that 270 hectares of new land coming into the market later this year equipped with necessary infrastructure and urban landscaping with clear titles, will be much more attractive to developers and developers will concentrate on that. Therefore, he said the prices of existing brown fields and green fields around Colombo are likely to suffer.
He pointed out that authorities and developers in Colombo haven’t given any thought to urban landscaping and Colombo is one of the few cities which doesn’t have an integrated public transport system.
Mayes highlighted that Colombo Port City will be a game changer as it would be the catalyst to promote development of infrastructure in Colombo and will eventually integrate existing Colombo with the Port City.
Speaking of imbalance between supply and demand in Colombo’s luxury condominium segment, Mayes said it will take three to five years for the imbalance to get corrected.

Commenting on future rental yields of condominiums in Colombo, he said “Rental yields are reaching the top of the cycle now and pressure on rentals would be downwards in the future.”

Mayes emphasized that there are large-scale supply shortages in International Grade A office spaces in Colombo, which is almost non-existent at the moment and in 3 and 4-star business class hotels in Colombo, while saying there were opportunities for developers in resorts due to booming tourism across the island and the retail sector is booming, he noted. Mayes added that office space…

…..at Shangri-La which is set to come into market in 2019, has already been leased. Hence, he pointed out that demand for International Grade A office space in Colombo is large and the current shortage is likely to remain over the next three years.
Meanwhile, Mayes asserted that the reintroduction of 15% VAT on new condominium sales will have a detrimental effect on condominium sales as it will dampen demand and weaken the sentiment. Due to high construction costs, severe labour shortage and reintroduction of VAT, he earlier said that developers will have to discount/incentivize and up their marketing game, if sales volumes are to be maintained.

Speaking to Ceylon FT, Chairman of the Judges of Sri Lankan edition of Asia Property Awards 2018 and CEO of Paramount Reality, Dr. Nirmal De Silva highlighted that the Authorities need to impose tougher penalties on developers who don’t comply with regulations, stating that current regulations were sufficient to tackle any irregularities in Sri Lanka’s real-estate market.
Moreover, he said that there was insufficient primary and secondary data available on the country’s real estate sector. Hence, he assured that the judging panel of Asia Property Awards 2018 will visit each development to get a clear idea about what each development is about, which are not necessarily published in newspapers and advertorials. He asserted “Our focus is on compliance, quality and design.”

Addressing Media Founder and MD of the PropertyGuru’s Asia Property Awards, Terry Blackburn said PropertyGuru decided to hold the Sri Lankan edition of Asia Property Awards due to the fact that Sri Lanka is a rapidly growing market, where real-estate sector has bounced back in the last five years. He said that it will help Sri Lanka to promote itself as an attractive market for real-estate in the region.

Answering a Media query why most real-estate developments were concentrated in Colombo, Mayes said that Sri Lanka is one town market, to achieve any significant growth locations such as Kandy, North-West or the hill country, infrastructure needs to be developed.

The Sri Lankan edition of PropertyGuru’s Asia Property Award is set to take place on 12July 2018 at the Shangri-La Hotel Colombo. The Award Series covers 17 leading real-estate markets in Asia currently. The regional grand final will be held in Bangkok, Thailand this year..