Top Issues Affecting The Real Estate Industry

Everyone talks about what a lucrative market the real estate industry is, but no one seems to realize that, as with everything else, real estate to has certain problems and issues that affect it directly. Yes, it is one of the best forms of investment for anyone at any given time, according to real estate companies in Sri Lanka, but this is not to say that there are no challenges faced by the industry, which in turn affects those working within it.

If you are a land buyer in Sri Lanka who is looking to buy bare land or low-priced houses in Sri Lanka or sell your own land, you may not realize the issues within the industry itself. It is those that have invested their livelihood into real estate that will understand this.

So, what are the current top issues affecting the real estate industry? Let’s have a look.

Economic issues such as inflation and rising interest rates

Inflationary rates are rising everywhere, irrespective of where you are living, and with it comes certain other economic issues as well, like increased borrowing rates, etc. This means that people will have to pay more for the money that they borrow, in times when purchasing power has been reduced drastically. This leaves the real estate market with a lot of problems because although people may want to sell when prices are high, there will be limited demand for it. In addition, there is a lot of economic uncertainty, with people even unsure of keeping their jobs with the financial crises that are escalating everywhere. With this uncertainty looming overhead, people will not be willing to spend the little money they have.

So, what does this do to those working within the industry, like real estate agents and companies? There will be uncertainty for them as well. Their lead costs will be much higher than the conversion ratio of leads to sales, and in addition to that they will never be sure of where they stand in the sales process when it comes to buyers. People will have cold feet about spending their money, and they may abandon a sale, which means reduced revenue for those working within the industry itself, which creates even more uncertainty.

Political uncertainties

Political instabilities within economies create uncertainty, and in uncertain times, people are not willing to make drastic decisions on spending. These political issues are not within one’s community alone but are those that have a global impact, and when these issues hit during a time when there is also economic unrest, then the situation only gets worse. Both consumers and real estate professionals will be uncertain as to what changes or new legislations that will be brought about that relate to the industry, which will deter even the most passive investor.

These uncertainties will have a direct impact on cost, availability, etc, which will in turn affect consumer spending decisions. Without stability within the political arena, there is no hope for the industry to progress.

Supply chain restrictions

Supply chain restrictions have proven to be one of the biggest challenges that the real estate industry is facing these days. With restrictions on imports etc, there are fewer and fewer items in the market for those that need them, and the few that are there, are sold at exorbitant pricing. Whether you are looking to build, repair or maintain a property, you will find that this issue has affected your costs, availability of labor and so much more.

Labor shortages

People are talking about shortages of jobs for people, but have you noticed that many job vacancies are being repeated because they do not have suitable people to fill them? While those with skills and qualifications have ventured to greener pastures and better opportunities, those that are left behind are not sufficiently skilled to be hired for certain positions. So where does that leave the real estate industry?

It has been found that there is an acute shortage of workers in the construction industry around the world, which directly impacts real estate. If you were to buy a piece of land today to build a house but were not able to find a suitable contractor, where does that leave you? With a bare piece of land, no money, and nowhere to live! In such a situation, people will think twice about investing their money in property, and this will have a negative impact on the industry as well.

Housing imbalance

It is no secret that there has been a housing imbalance within the Lanka real estate industry for many decades, however, with the Covid-19 global pandemic, more and more people opted to move in with their parents, or co-live due to increased expenses and reduced incomes. This further created an imbalance between demand and supply, which has affected those working in real estate. With decreased incomes, more and more people will be moving towards rentals rather than ownership, which can deepen this problem even further.

Environmental, Social, and Governance Criteria

Under the environmental, social, and governance criteria, it has been found that many countries are requesting real estate investors to divulge their portfolios and publicly disclose their asset’s environmental impacts, such as water and energy usage, carbon emissions, etc. These disclosures looming over investors’ heads, and the fact that they are being closely scrutinized for inaccuracies, are factors that are deterring new investors from moving into this arena.