BREAKING NEWS
July 13, 2007
Construction Bust?
A combination of an uncertain economic scenario with rising interest rates and costs of borrowings, rising conflict and abduction-for-profit, is affecting the real estate market and dampening the condominium housing boom.
Developers said property and new apartment prices were coming down while expatriate Sri Lankans are having second thoughts on investing on condos.
They said among the more than 100 top Sri Lankan businessmen who are believed to have left the country due to threats of abduction-for-profit (ransom) were some property developers and investors.
The land value in Kollupitiya has dropped from six million rupees per perch to 4.5 million rupees due to this situation.
The Premier Pacific International Pvt Ltd, one of the big developers in the city, this week offered for sale a 153-perch block it owned at Sri Sangaraja Mawatha - in an apparent indication of the condo crisis.
The Sunday Times FT spoke to property developers, real estate agents and residents of the complexes. The drop in demand of property is felt by all players in the real estate market. Nethru Nanayakkara, a realtor, said there is a definite drop in demand for apartments and condominiums. He estimated it at around 30%, adding that it was a very conservative estimate. He said the Wellawatta property market which attracts many Tamil expatriates, is currently stagnating as there are no buyers and land values have dropped.
Shan Kumarage, project co-ordinator of the online real-estate portal "Bhoomi," also noted a drop in the market. "Going by the feedback we get from the brokers and buyers there is no market at all for residential property," he said.
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Trouble in Paradise as Real Estate 'Bhoomi' Goes 'Bhusti'
By: Pete Kendall, July 17, 2007 |
Staying in traditional real estate will prove to be a deadly decision. It’s not the “Goldilocks” 1950s. It’s not the inflationary 1970s. And it’s not a “business as usual” extension of the 1980s-1990s bull market. It’s 1929 times ten.
The Elliott Wave Theorist, March 2007 |
This certainly looks like the downturn in social mood has gone global in a hurry. Sri Lanka is about as far away from the US as one can get and still be on planet Earth. This story has multiple negative elements in one place: economic uncertainty, rising (ethnic) conflict and abduction for profit in addition to the real estate problems. Sure sounds like a bear market witches brew.
-- Deron Kawamoto
Says the Sri Lanka realtor site lankarealestate.com, “Sri Lanka has been emerging from a generation of unfortunate political and social turbulence - one that has resulted in the country being unable to a large extent to realise its tremendous potential.” After a period of peace in the early 2000, the peace process is being “tested and troubles have again resurfaced in the North and East of the island - a development that has led us to suspend our activities in the beautiful coastal areas around Trincomalee. Whilst we caution any buyers from investing in this area, the market in the south and central areas of Sri Lanka is still extremely buoyant and relatively risk free.” The tighter the real estate noose gets, the more real estate professionals insist that the as-yet unimperilled elements of the industry are “relatively risk free.”
For more on EWI’s approach to real estate check out Wayne Gorman’s online investment course on real estate trends: Learn to Anticipate Real Estate Trends – For Buyers, Builders, Bankers and Brokers .
It's worth noting that the main Sri Lanka stock index, the Colombo All Share Index, participated in the global bull market in financial assets by rising from a 2001 low and multiplying 6X through the early part of 2007. The high marked the end of clear five wave moves from August 2001 and January 2005. The decline since February is also five waves, so the Elliott waves suggest strongly that social mood has shifted from up to down in Sri Lanka. The coincident decline in the property sector is an excellent sneak peek at the future for those country's where stock markets are still rising. When the big domino effect reaches reaches them, there will be "no market" for their real estate, also. |
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