Real Estate Market Analysis

5 months ago

The year 2018 was like a nightmare for Pakistan Real Estate Sector. Property market was in constant decline due to the new property laws, political instability and economic meltdown. The situation is still the same at the dawn of 2019.

BUYERS are waiting for the right time to buy properties due to two major reasons. Firstly buyers want to see the outcome of NABs investigation of illegal housing schemes. Secondly buyers are waiting for the property prices to bottom out so that they can buy properties at very affordable rates.

SELLERS are of three types. In first category are the sellers who have the holding power and can wait to find the suitable buyers. In second category are the sellers who need cash and are willing to sell properties at loss. In third category are the experienced sellers who know that prices are falling so they are desperate to sell properties immediately to minimize the losses.

REALTORS are in worst situation. 40% estate agents have closed their agencies because of record low incomes. The realtors who became investors have sustained huge losses. Even many have even sold out their cars and homes. Everyday realtors are switching to other businesses due to the disappointing situation of real estate sector.

Pakistan Real Estate Sector is in decline due to low investments

Real estate sector works on a simple fundamental called as demand and supply. Demand shows the volume of investment whereas supply shows the property stock. The volume of investment in reality sector increases or decreases the demand. High volume of investment in real estate sector increases the property demand that results in high property prices. But low volume of investment decreases the property demand and results in low property prices. Currently there is low property demand in Pakistan as few people are willing to invest in real estate sector.

Factors that have diverted the investments from real estate sector

FBR Immovable Property Valuation Rate Increase
Inquiry about source of income; crackdown on black money
Property buying restrictions for Non-filers
Heavy fines on registrars to process the files of non-filers
Foreign Pakistanis restricted to transfer funds before 60 days of purchase
Government’s buying back scheme for properties registered at low rates
High Interest Rate has forced the people to deposit money in banks
Fear of losing money due to the property scams; housing schemes
Start of 5 Million Affordable Homes; NAYA Pakistan Housing Program

Price trends in future

Since 2016 property prices are in constant decline due to economic uncertainty and strict laws to control black money. Prices are already 35% low from the peak of 2016. If we observe the decade property cycle then real estate prices will be record low in 2019 as were in 2009. Pakistan property market situation is similar to Dubai real estate sector where prices have crashed by 75% due to the new laws about sharing the information of investors. As Pakistani property market was also alcoholic of black money, so in the presence of current strict laws prices will further decrease.
Pakistan real estate market is witnessing the worst situation since 2005. Property transactions are record low as compared to the peak of 2016. Rising interest rates have greatly reduced the investment in reality sector as people are depositing money in banks to hedge it against inflation. 2019 will be one of the worst years for property sector as economic condition, rising interest rate and strict black money laws are enough to keep the market subdued. Many realtors expect big price fall if situation remains the same.

Source:   January 1, 2019 by Anwaar ul Islam


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