Condo sector sales down due to political turmoil
The current political impasse has negatively impacted condominium sales. Last month condo sales were bad and this month, which is the worst month in terms of apartment sales will be worse, builders say.
Many builders said that the past month has been especially bad. “We sold eight apartments last month. That is pretty bad (for us). This month, which is slow anyway – we aim to sell six,” a prominent builder told the Business Times.
The country has been gripped by a constitutional face-off between President Maithripala Sirisena and his sacked Prime Minister Ranil Wickremesinghe, who refuses to step down. The Court of Appeal ordered an interim injunction on former President Mahinda Rajapaksa from acting as prime minister. The court is hearing a petition challenging his refusal to step down despite losing two no-confidence motions last month.
Added to this, the rising inflation and currency depreciation isn’t helping sales either, builders say. Inflation, the economic word which refers to the devaluation of currency, can sound like an earsplitting noise to many investors. The builder said that locals who pay by converted US dollars were holding onto their cash when the dollar was on the rise. “Many buyers still owe us money,” he said. Another builder confirmed it, but said with rising inflation they expect sales to increase. As property is a physical asset that denotes more than just minimal paper value, it has long been regarded as a good investment to guard against the brunt of inflation on your finances. When inflation occurs, house prices and rents increase, which is a win-win for property investors.
"When cash in financial institutions won't grow, people will turn to real estate," the second builder said.
As much as 40 per cent of the total input materials in a condominium are imported. The rising US dollar has badly impacted builder costs, according to many builders. Cement, along with iron and steel, sand and bricks, is one of the major materials in use in the country. Builders say the cost of construction is now higher, particularly the costs associated with materials and workers.
The ongoing political upheaval, which has disrupted the normal functioning of parliament, exacerbates the country’s financial situation. The tightening of monetary conditions will affect apartment sales as well, he said.