For some time there’s been a neat narrative told of Sri Lanka’s propery market.
The ending of the war in 2009 revived both local confidence and international interest; an increasingly affluent middle class is now driving demand; a burgeoning tourist industry has hiked the market for holiday accommodation; recent elections have shown the country on a steady democratic path*.
That story’s starting to feel a little dated.
10 years isn’t a long time in a history book so the Civil War narrative – and other parts of the story - still resonate, but it’s more than long enough for the fundamentals of a very undeveloped property market to shift hugely.
In prime locations, prices have jumped. That appreciation has been part-driven by improved infrastructure, and of course that improvement continues, meaning sale values have higher to climb. But buyers and investors need a smarter approach to real estate than they did 10 years ago. Not every ‘buy’, now, is the value opportunity it once was.
Anecdotally, of course, it’s easy to tell a very positive story. Current land prices – in tourist hotspots or not - will almost universally compare incredibly well with those of ten, even five, years ago. Romantic references to Colombo skylines also talk happily of a ‘remarkable transformation’ in one of the now top global cities for international investment.
But though sales figures (at least those we’ve seen) from the new high rise developments are very positive, the aren’t yet the figures (or the returns) to back up that outlook with any absolute certainty.
That doesn’t mean the optimism’s misplaced. We see real opportunity away from the better known development hubs of Colombo and the southern coast. The infrastructure improvements already referenced will open up new parts of the island - making investment around Kandy and in the wider Central Province, our current area of real focus, a far more viable prospect.
We remain, though, in a young, dynamic market and going with that is a need for some caution.
At the root of it, we think that broad-brush trends shouldn’t be enough on their own to convince of the rights or wrongs of investing here.
Those remain positive but Sri Lanka is a wonderfully diverse island with a great number of – often quite esoteric – sub-markets. Really understanding the subtleties of those is the route to finding fantastic, suitable opportunities. It’s in that regard that we look to work for and alongside our clients and partners.
* The most recent political ‘crisis’ no doubt landed a considerable smudge on the island’s democratic credentials but the vehement popular response has gone some way to reinstall confidence.