Colombo overtakes Hong Kong and Shanghai as the top unaffordable city for homebuyers — see the data and implications for residents.
Colombo — the bustling commercial capital of Sri Lanka — has just been ranked the most unaffordable city in the world for buying property in 2026. According to the latest Property Prices Index from Numbeo, the world’s largest cost-of-living database, residents in Colombo face a level of housing cost relative to income that no other city does.
This shocking result highlights a growing crisis in the city’s housing market: prices have far outpaced earnings, leaving many families unable to buy even modest homes. In a global ranking of nearly 400 cities, Colombo sits at the very bottom for affordability — higher than property hotspots in Hong Kong, Shanghai, Mumbai and Manila. Below, we break down why this is happening, how it affects everyday life, and what it means for the future of Sri Lanka’s economy and society.
Main Point: Colombo Tops the Global Unaffordable List
The Property Prices Index shows that Colombo’s price-to-income ratio is 55.3, meaning the average property costs more than 55 times the average annual income of a local resident. This figure is the highest in the world, pushing Colombo ahead of other Asian cities traditionally known for expensive real estate.
In practical terms, this ratio means:
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A person earning the average local income would need more than 55 years of income to buy a standard apartment in Colombo — assuming they saved every rupee and spent nothing on living costs.
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Mortgage payments — the amount someone must pay back to banks over time — are 774% of average annual income, putting huge pressure on households that attempt to borrow.
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The affordability index is just 0.1 — extremely low — showing how difficult it is for locals to enter the property market.
By contrast, other global cities like Manila, Taipei, Shanghai and Mumbai all have significantly lower price-to-income ratios — meaning properties there are relatively more affordable compared to local earnings.
Background: How Housing Affordability Is Measured
Before we go deeper, it’s important to understand what terms like price-to-income ratio and mortgage burden really mean.
🏘️ Price-to-Income Ratio
This ratio tells us how expensive housing is compared to how much people earn. For example:
👉 If a house costs 20 times the annual income, it means someone earning X per year would need 20 years of income to buy it.
👉 But in Colombo’s case, the ratio of 55 or more means homeownership is nearly impossible for average earners.
🏦 Mortgage Burden
This measures how heavy mortgage payments are compared to income. When mortgage payments are 774% of annual income, people must commit nearly eight years of total earnings just to meet mortgage payments — before buying food, paying rent, or covering other costs.
📉 Affordability Index
An affordability index near zero tells us that income is almost powerless compared to housing prices. Colombo’s 0.1 index shows that housing has become out of reach for most locals.
📊 Why Colombo Is So Unaffordable
Several factors have combined to push Colombo to the top of this uncomfortable ranking.
1. Wages Haven’t Kept Up with Property Prices
Although property values have soared, average income growth has lagged far behind. As a result, people simply don’t earn enough to afford homes even with long-term savings or bank loans.
2. High Borrowing Costs
Mortgages in Sri Lanka often come with high interest rates, making borrowing expensive and risky. When repayments are a massive portion of income, many people avoid taking loans altogether, shrinking the number of buyers.
3. Investment Demand from Outside the Local Market
Property investors — both foreign buyers and wealthier Sri Lankans living abroad — often buy real estate in Colombo as an investment. This drives prices up even more but doesn’t help local affordability.
4. Construction and Land Costs Rising Sharply
Construction material costs and land values in Colombo’s suburbs and central areas have climbed quickly, pushing homes further out of reach for average earners.
5. Low Rental Yields
Gross rental yields — that is, the amount of annual rent relative to the property’s price — are low in Colombo (around 3% in the city center and under 4% outside center). That means investors earn relatively little from renting, but prices stay high anyway.
📉 What This Means for Families and Communities
The unaffordability of housing isn’t just a number — it has real effects on everyday life.
🏠 1. Dreams of Homeownership Fade
For many young professionals and families, owning a home in Colombo is no longer a realistic goal. Even middle-income earners find the gap between earnings and property prices too large to bridge.
🪙 2. More Pressure on Rentals
When buying a home is impossible, people turn to renting. But higher rent prices squeeze monthly budgets, leaving less money for savings, healthcare, education and daily needs.
🚶 3. Longer Commutes and Less Stability
Many people are forced to live far from the city center — where housing is slightly cheaper — and commute long distances to work. This increases travel costs, stress, and time spent away from family.
📉 4. Increased Socioeconomic Inequality
Wealthier buyers can still afford premium properties. But for average citizens, economic inequality widens when housing remains affordable only to the rich or foreign investors.
🧑🎓 5. Impact on Youth and Families
Young graduates who work in Colombo may struggle to afford housing for decades, affecting life plans such as starting a family or investing in education.
🌍 How Colombo Compares Globally
While Colombo now sits at the top of this world ranking, it is not alone in facing housing affordability problems. Many global cities have seen similar trends where earnings don’t match real estate prices. However, Colombo’s situation is more extreme:
| City | Price-to-Income Ratio | Affordability |
|---|---|---|
| Colombo, Sri Lanka | 55.3 | Least affordable in the world |
| Kathmandu, Nepal | ~41 | Much more affordable than Colombo |
| Manila, Philippines | ~36 | Affordable relative to income |
| Shanghai, China | ~33 | Lower ratio, better affordability |
| Taipei, Taiwan | ~33 | Better income balance |
Despite its smaller size compared to global hubs like New York or London, Colombo now outpaces them in unaffordability, largely because local incomes have fallen far behind property value growth.
🧩 Why This Matters for Sri Lanka’s Future
The housing crisis in Colombo isn’t just a property issue — it’s a social and economic concern with long-term effects.
📊 Economic Growth May Slow
When citizens cannot afford property, they spend less on other parts of the economy. Reduced consumer spending can slow overall economic growth — especially for a nation already facing financial difficulties.
🪙 Local Banking Strain
High mortgage burdens and low repayment capacity can strain banks. If too many borrowers struggle, financial risk rises.
🏘️ Urban Planning Challenges
With housing concentrated in a few premium areas, urban planning becomes difficult. Without affordable housing options, city services, transportation systems and infrastructure are under strain.
🧠 Young Talent Leaves
If living in Colombo becomes too expensive, young workers might move to smaller cities or overseas in search of better opportunities, leading to brain drain.
📌 Toward a More Affordable Future
Colombo’s ranking as the world’s most unaffordable city for property buyers in 2026 is a wake-up call for policymakers, developers and residents alike. It calls for:
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Improved wage growth that better matches inflation and housing price increases;
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Affordable housing initiatives to help middle-income earners;
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Balanced development policies that encourage local ownership and protect first-time buyers;
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Financial reforms that make mortgages more accessible and less burdensome.
Unless meaningful changes occur, the dream of owning a home in Colombo may remain out of reach for many more years — a situation with consequences that go far beyond the property market.