Expats thrive in costly Colombo rental market
The demand for apartment rentals in Colombo is mostly centred around expat workers, driving them to such soaring prices which locals cannot afford, experts said.
Niloshan Mendis, General Manager of Business Development at Global Housing Real Estate said the local high-end income earners are buying apartments. About 80 per cent of the sales are driven locally. Only about 20 per cent of these belong to the diaspora. “Most expats are buying these apartments,” Mr. Mendis said at a panel discussion at the recently concluded Lanka Property Show titled “Meeting Tomorrow’s Housing Demand: How Demographics, Migration, and Lifestyle Changes Are Reshaping Real Estate Investment”.
He said that the industry is witnessing local Gen X and Millennials purchasing apartments. Gen X, he said, who are armed with bigger purses, want apartments for investment purposes, more than for living purposes. Millennials are looking at schools, shorter time taken to commute to work etc. and longer-term prospects when purchasing these units.
Mr. Mendis added that foreign employees who are in Colombo for investments such as the Port City area have driven high rental yields. “These high rental yields in Colombo and the suburbs are making it very unaffordable for locals to live on rent.”
Noting that the dollar to rupee exchange rate was around Rs. 170 to 180 earlier, but in mid-2022, it doubled and as a result, he said the apartment prices also went up.
Sri Lanka’s protectionist policies have resulted in high apartment prices which the middle- and lower-income classes cannot afford, said Economist Prof. Sirimal Abeyratne. He said that when the population increases with rising income levels, people move from rural areas to urban areas, which hasn’t been the case in Sri Lanka. “When this happens, they move from the traditional agricultural sector to the modern industry and services sector.” Noting that the country’s population has tripled in the last seven decades since independence, he said the physical location and distribution, according to the Census Department statistics in 2024, have not changed. He pointed out that according to the report, 78.5 per cent of the population still lives in rural areas.
Noting how China addressed a similar issue in 2010, he said that China addressed this issue by making a new type of urbanisation plan, which aimed to move 100 million rural people to the urban sector and build apartments and amenities around these apartments. “Sri Lanka also has a similar issue, but we are romanticising the rural life more than it is supposed to be.”
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