CB yet to make call on high-end real estate sector

Central Bank yesterday said that studies into the real estate sector were continuing and the institution would work with the industry to decide if macro prudential measures were necessary to ensure sustained growth.     

The Governor, who had earlier voiced concerns of a possible bubble growing in the high-end apartment market, noted that the aim of the Central Bank was to ensure steady growth.   

“There has been some slowdown but I think a moderate slowdown is a good thing. We certainly don’t want a sharp slowdown but some moderation in the luxury property market is not a bad thing and what is happening now is that my colleagues in the Central Bank are working very closely with the Property Developers Association to understand what is happening and we will work with them to understand whether we need to take any macro prudential measures or other measures to make sure that the sector grows in a sustained manner. Obviously we don’t want overheating.”

The Central Bank is primarily concerned with how much exposure local banks have to the luxury apartment sector with possible knock-on effects if there is a drop in demand.     

“At first glance it is clearly a segmented sector. In the affordable housing sector, the middle income housing sector, there is a shortage. The question is whether there has been too rapid a build-up in the luxury market. 

He acknowledged that demand remains high for the luxury apartment segment, which is also bolstered by more and more people choosing to move from the suburbs to central Colombo.   

“What we are trying to find out is to have a very granular understanding of what is happening there and whether or not we need macro prudential measures to have sustained growth. We don’t want to stifle the sector in any way but to ensure that there is sustained growth.”