News / Articles

Check out market updates

Low interest rates and Pakistan real estate sector

State Bank of Pakistan cuts interest rate by 1.0 percent

Today, State Bank of Pakistan cuts interest rate by 1.0 percent. Now discount rate by the State Bank of Pakistan is 8.50 percent. According to the Governor of the State Bank of Pakistan, Ashraf Wathra, this lower rate is due to the declining inflation rate in Pakistan. Inflation rate in Pakistan is decreasing due to the declining oil prices worldwide. Historically, average interest rate in Pakistan from 1992-2015 is 12.50 percent. Highest interest rate in Pakistan was 20.0 percent, October 1996. Whereas, lowest interest rate in Pakistan was 7.50 percent, November 2002.

Impact of interest rates on property market

Property market is always affected by the changes in interest rates. When interest rates rise people have to pay more on the borrowed money and when interest rates decrease people have to pay less on the borrowed money. So, economic & real estate boom is witnessed when interest rates are lower and economic & real estate activities stall when interest rates are higher.

Real estate booms in Pakistan were due to the low interest rates

Pakistan has witnessed the two real estate booms in this century. First property boom in Pakistan was observed in 2003-2005, when interest rates were lowered to 7.50 percent in November 2002. Second property boom in Pakistan was observed in 2013, when interest rates were lowered to 9.0 percent in July 2013. Due to the instability in Pakistan and low economic activities, inflation is always very high. People are always worried to hedge their money against the inflation. People in Pakistan deposit their money in saving accounts when interest rates are high and invest money in the real estate sector when the interest rates are lower. Real estate sector is generally considered as the best hedge against inflation in Pakistan.

2015 is the year of another real estate boom in Pakistan

Past trends in Pakistan show that there is always a rise in real estate activities when interest rates are lower, as people withdraw money from the saving accounts and invest in the properties. Same will happen now and we will see a rise in the real estate activities in Pakistan, which will help to revive the Pakistan real estate sector that was stagnant during 2014. Therefore, 2015 is a good year for the property market of Pakistan. But it is important to note that property prices will not rise over night. That will take some time and rises would be gradual. More prominent rises would be observed between July-December, when most overseas Pakistanis visit homeland during two Eids and summer/winter vacations. Looking forward a wonderful year for Pakistan real estate sector.

Recommended:
New Projects in Pakistan

Leave a Reply

Your email address will not be published. Required fields are marked *