Sri Lanka’s amazing house price boom, amidst surging tourism
Quarter-on-quarter, house prices increased 4.9% (4% inflation-adjusted) in Q4 2018.
Average house prices soared 50% y-o-y in Colombo, Sri Lanka’s capital city, (45.6% inflation-adjusted) to LKR 165.74 million (US$ 948,124) in 2018.
During the latest quarter, Colombo house prices rose by 15.1% (14.9% inflation-adjusted).
Almost all provinces saw rising house prices, with Sabaragamuwa registering the biggest annual increase of about 40% during 2018, followed by Central (27.5%), North West (27.1%), Western excluding Colombo (17%), and Southern province (0.3%).
Land prices are also rising. In Sri Lanka, the average price of a residential lot was up 15.3% y-o-y in 2018, to LKR 1.36 million (US$7,780) per perch (1 perch is equal to 16.5 feet). Likewise, land prices in Colombo also increased 5.5% y-o-y to LKR 11.56 million (US$66,130) over the same period.
Sri Lanka’s booming tourism sector is fuelling property demand. In 2018, Sri Lanka saw a record 2.3 million tourist arrivals, up 10.3% from a year earlier, according to the CBSL. India, China, Britain and Germany were the leading markets last year while Australia registered a significant growth.
Then in the first two months of 2019, tourist arrivals increased again by 4.6% to 496,272 people from the same period last year.
Despite strong demand, residential construction remains weak. In the first half of 2018, the total number of housing approvals in Greater Colombo fell by 11.1% to 5,130 units from a year earlier, according to the Central Bank of Sri Lanka (CBSL). Housing approvals fell by 4.7% in 2016 and by another 6.9% in 2017.