The tsunamis that ravaged Sri Lanka are unlikely to dampen the island nation’s booming property market in the months ahead as foreigners hopefully sniff out bargains and aid floods in, analysts said.
Property prices on the palm-fringed island nation have risen dramatically in the past three years, due partly to a February 2002 truce in its long-running civil conflict holding, a rise in interest among well-heeled Sri Lankan expatriates as well as the abolition of a tax on foreign buyers.
In some areas of Colombo, properties were being sold for double or triple their price pre-tsunami compared to a few years ago, while beachside properties did a roaring trade despite the reintroduction of the 100 percent stamp duty for foreign buyers in 2004.
And analysts say that the December 26 tsunami tragedy that killed nearly 31,000 Sri Lankans has not curbed market enthusiasm for either foreign or domestic buyers.
"Given what has happened it’s actually surprising…. There has been a tremendous increase in the number of inquiries" about purchasing and renting properties in Sri Lanka, Iqbal Cassim, from Lankaproperty.net, told AFP.
His web site caters to foreigners and Sri Lankan expatriates.
"They may have been thinking that prices may have come down, or there would have been a correction, or that they could get a deal. But most of the property owners are not desperate to sell," he said.
"Demand has been good but it’s still a seller’s market. Prices are quite high and I don’t think it’s going to come down because of the tsunami."
Government plans to introduce tough legislation banning new construction in a 300-metre (-yard) zone along the coast to prevent a repeat of the tragedy, while providing land to those displaced, may still be a wildcard.
"There may be some correction in beach and coastal areas (because of this)… but especially in Colombo it’s been quite buoyant and if at all it may even go up," Cassim said.
Land offered to displaced people could increase local market supply if the recipients sell plots, JB Securities managing director Murtaza Jafferjee told AFP. He said past low-income housing projects had suffered this phenomenon.
"Most of the affected people who have to be relocated will be given Crown land … so with excess supply on the market that could dampen property for domestic purposes," Jafferjee said.
However, overall he too said the tsunami-effect would be minimal, with excess liquidity in the economy — boosted further now by massive aid inflows — still likely to be pumped into property.
"I would think that it would continue to be buoyant because there is still excess money supply out there," he said.
Pre-tsunami, Jafferjee foresaw a cooling off in the market as too many people were priced out: "Prices have become so high, they’re just not affordable anymore."
Cassim, too, said prices were due to be reined in by a flood of apartment developments set to hit the market but this would now be balanced out by the influx of aid and technical experts who will need to be housed.
"I don’t see prices coming down. I don’t think they will go up immediately but it will be at level for at least six months, after which I would foresee prices going up again," he said.
In the longer term, aid with fewer strings attached and a focus on improving infrastructure could see shifts of patterns in the market.
For instance, the construction of a planned highway from Colombo to the southern seaside town of Matara, badly hit by the tsunami, and in near potential resort areas, could level off Colombo’s heated market, analysts said.
"If they build the highway, parts of the country in the deep south will be more accessible," Jafferjee said.
"I would think that if the infrastructure goes in, there will definitely be an improvement in the property market and then to some extent a levelling off of the market in Colombo."
Ranga Goonawardena, general manager of major player Ceylinco Housing and Real Estate, said that prices in residential coastal areas may drop in the very short term, but would bounce back before booming again.
"There is a lot of demand from people who are buying for investment purposes. They will also buy if the prices come down drastically. After two to three years, the prices will again start booming," he said.