Bubble may be in Sri Lanka ‘luxury’ apartments: developer
ECONOMYNEXT – A high-rise apartment developer in Sri Lanka has said there may be a bubble in ‘luxury’ apartments, but slammed Central Bank Chief Indrajit Coomaraswamy for sounding an early warning on rising property prices and cash flowing into the sector.
A statement from Fairway Holdings Chairman Hemaka de Alwis said, "There is a possible bubble in the segment identified as ‘luxury’."
"Surely, when the highest segment sells at double the price per square foot of the mid-range, there is every possibility of an unrealistic element in the pricing because the cost/quality base is the same – but the point is the whole industry can’t all be tarred with the same brush."
However, he claimed that "the mid-range market is driven by solid fundamentals, underlying a gradual move towards modern city life."
"Sri Lanka is not an isolated case but part of a global trend towards urbanised vertical living – there is clearly no bubble, as there is no unrealistic pricing, but a strong trend of demand-driven growth."
The statement claimed that the Central Bank Governor’s words on prudential measures were "irresponsible and damaging".
He said, in the case of Fairway projects, only 10 percent of customers used bank loans and 75 percent bought the apartments to live amid growing demand for ‘vertical’ urban living.
Coomaraswamy had told reporters earlier that the Central Bank was studying credit going into property to find out whether there is a need for action, and prevent any bubble from bursting.
"So, the job of the Central Bank would be to try to take macro-prudential measures, not to essentially stifle the sector, but to kind of slow it down to a more sustainable growth path. That is what the (monetary) board is trying to figure out," Coomaraswamy was quoted as saying in one report.
The Central Bank has a mandate of maintaining price and economic stability in the country.
Industry watchers say there is concern over one or more top-end projects and a failure of a high-end project will also have a domino effects elsewhere. (Colombo/May26/2017)