Are residential apartments the best asset class in town? Probably

IT was said many years ago that Sri Lankans would never take to apartments because indigenous values demanded dwellings to have gardens, be accommodating to continuous refurbishments and for properties to be transferable from one generation to the next.

- BY THE RESEARCH INTELLIGENCE UNIT, COLOMBO

Over the past two decades, we have witnessed the complete debunking of the myth with the volume of high-end apartments growing exponentially, corelating positively with high growth in GDP, improvements in living standards and a conducive external environment.

The most significant boost to the apartment sector was of course the peace dividend that resulted in a complete transformation of the Colombo skyline with increasing numbers of residential apartment buildings silhouetting all parts of the city, spreading out to the suburbs. Blessed with serene natural beauty, Sri Lanka’s real estate market has withstood the best efforts of incompetent policy makers to shine through the darkest hours in recent history. The story of high-end apartments is an excellent case in point.

Currently there are around 14,000 tier 1, 2 and 3 apartment units in the Colombo city with a further 2,566 units under construction. In the suburbs of Colombo, there are over 9,000 apartments with a further 3,013 awaiting handover. Nevertheless, the appetite for more inventory is yet to be quenched.

Whilst domestic economy was battered and bruised over the past six years, few asset classes managed to hold their value for investors. By contrast, the apartment sector held its ground throughout the storm. Factors which underpin the strong apartment capital gains, include tourism growth, the diaspora, urbanisation and the demand arising from a growing buy-to-live segment that seeks location convenience at an affordable price.