The market is not in the most ideal situation at the moment but analysts are convinced Sri Lanka’s real estate is set to pick up in the first quarter of 2019. Particularly, residential developers that enjoy steady cash flow are set to benefit from the projected gains that the country’s property sector will be encountering at the start of next year.
Financial services firm KPMG said there will be noticeable increase in the sales of residential units and pointed to the condominium segment as the chief beneficiary of the forecasted spike. The company predicted that buyers and investors will be in shopping mode ahead of the Sri Lankan government’s plan to implement a 15 percent value-added tax (VAT) on condominium sales.
Halt To The Slowdown
In recent months, the market appeared to have suffered “bit of a slowdown,” but according to The Daily Mirror the general situation will change for the better and better results will be seen by the start of Q2 2019.
“It might change next year as VAT is supposed to come into effect in April next year. Even if there’s a bit of a slowdown in the market due to current situation, it will pick up early next year,” KPMG was reported by the publication as saying.
The firm indicated that condominium unit prices, for instance, will climb by up to 10 percent, due in part to the depreciating value of the Sri Lankan national currency. KPMG noted too that the weakening rupee is the same reason condo sales declined slightly in the past months, which is especially true for the local buyers.
“Some of the high-end apartments are priced in US$, hence the cost for local buyers has climbed by around 20 percent,” the auditing firm explained.
Market Remains Fairly Robust
Yet for the most part, the property market in Sri Lanka remains in solid footing as KPMG said real estate developers are still drawn into luxury residential projects. The Mirror report said the market segment is currently looking into the likelihood of supply glut, pointing out that by 2020 there will be an estimated 14,000 luxury residences available to the market.
In 2016, the total stock was set at just 4000 units, somehow proving of the huge leap in supply in mere span of four years.
Looking forward, KPMG said there likely will be challenges to emerge like the ongoing slowdown in condominium sales. Such a problem, however, will not leave a significant impact on developers whose financial standing are on the solid side.
“If you are a big developer with enough cash flow and bank facilities, then you are fine; you can retain a part of the stock and you can even rent it out,” the company said.
For some of the small players not as fortunate as the big ones, they will have to make necessary adjustments to encourage better sales and faster movement of stocks. They may need to offer more competitive pricing and flexible payment schemes, KPMG said.