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Is there a real estate bubble in Pakistan?

Is there a real estate bubble in Pakistan?

Pakistan real estate sector boomed from 2003 to 2005. During that time property prices were sky high and out of reach of common people. But eventually we saw it burst and investors sustained heavy losses. Once again Pakistan real estate sector is in bubble phase (house price to income ratio is 14:1 as per NUMBEO) and can burst anytime.

Reasons of present bubble
Record low interest rate

Pakistan state bank interest rate is record low at 5.75%. Due to low profits on fixed deposits, people have withdrawn their money from banks. This money has been invested in the real estate sector due to which we can see high property prices. But we should know that interest rates will not always remain so low as average historic interest rate in Pakistan is 11%.

Foreign buyers with high purchasing power

Many Pakistanis live in Western and Middle Eastern countries. They send huge remittances and large part of this money is parked in the real estate sector. Due to higher purchasing power as compared to local Pakistanis, foreign Pakistanis buy expensive properties which increase the overall property prices.

Massive influx of black money in reality sector

Real estate sector and black money has long history of hot romance. People just buy real estate to whiten the black money. Due to massive influx of black money in real estate sector, prices have gone insanely high. It’s hard for honest person in Pakistan to buy a decent home. Without black money, prices will be me much lower.

How this bubble will burst?

We will either see the hard or soft crash. Property prices will crash hard if there is an effort by government or SC to curb the black money. Soft landing will be in the case if purchasing power increases due to fast rise in salaries, but property prices will be stagnant for 4-5 years. It’s clear that we have entered the bubble territory once again. Let’s see it’s a soft landing this time or hard crash like 2005.

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(48) Comments

  1. Hassan

    on   said 

    Hi Brother! I want to buy home in DHA or Bahria Town Rawalpindi.
    Is it good to buy property now or shall we wait till mid next year if market prices gets reasonable?
    Or is there any other better society in Rawalpindi to buy a home under 25million?

    Thanks.

    Reply
    • Hassan
      Prices are collapsing nationwide, but largest effect will be felt in Bahria Town and DHA as both societies are famous for high speculation & parking black money. As SC has started massive crack down on black money so prices will fall. This price crash will be the biggest in the history of Pakistan.
      Its better to wait till December this year to see the massive price fall. Its better to wait s you will secure cheap properties.

      Reply
  2. Imran Khursheed

    on   said 

    Brother i am thinking to buy 1 kanal.plot in Islamabad cooperative housing society for living purpose. Can u guide me if its a good decision? My range is 18 to 20 lac. Or in ur view whats the best society for investment and living purpose. Thanks

    Reply
    • Imran Khursheed
      Its good society for living and also for investment purpose. But at the same time you should know that its also near to CPEC route so you should invest money for at least 3-5 years for good returns.

      Reply
      • Imran Khursheed

        on   said 

        Thanks for the reply. I also wanted to know about faderal government employees housing near thalian. I heard there r issues in it. Is it legal? And which one is better Fgehf or Islamabad cooperative? I am depending on ur opinion.

        Reply
        • Imran Khursheed

          on   said 

          Forgot to mention that I am having a plot in bahria town phase 8 . And I am selling it andwant to invest in any above mention society. Is it a wise decision?

          Reply
          • Imran Khursheed
            Just stay where you are. Bahria Town Phase 8 is better option. Market is gonna collapse soon and you will see crack down on housing societies too. Illegal housing societies will end soon. So after few months you will get better and safe investment option.
            If you want to sell not a bad idea. Just keep money in bank and after few months when property prices fall you can buy some good plot.

  3. Zameer

    on   said 

    Has there been any measurable decline in prices uptill now?
    I have seen n observed in Bahria Phase 8 n 1-4 at least, demand prices of houses by sellers have declined a bit … In Feb this year, almost no one was selling a house for under 23 million but now we see houses in 2 to 2.1 demand n the seller is willing to come down to 190 even …
    In Bahria Phase 8, at least I have seen people asking 1.7 to 1.8 n willing to let go their property for a million less …
    Panic has hit the market … Or atleast to those who want to bailout while they can …
    That’s why I suggested my parents not to start building a house in such new schemes, we might not see them getting any new residents in next few years
    What is ur analysis of this expected crash or stagnation …

    Reply
    • Zameer
      Situation is same in DHA Lahore as asking price has slipped by 10-15%. Property transactions are also record high in DHA Lahore. I have always told that DHA & Bahria Town are best housing schemes for living but are also hug of SATTA and speculation. In every crash you will see that these societies are hit hard. Because there are empty plots and less houses and even very few people live there. So due to high influx of black money chances of prices crash is always higher.
      Property price is crashing / stagnant due to higher taxes, political turmoil, JIT and economic decline in Middle Eastern Countries. SC is having ruthless crackdown on black money. Without black money property prices will only fall as Pakistan property market is alcoholic of black money.
      Panama case decision is also game changer for Pakistan real estate sector. It will totally crash the property prices as without black money prices cannot remain so high.
      If you want to sell, sell immediately to avoid massive losses in near future and if you need to buy just hold little more. Once crash is complete you can buy cheap properties.

      Reply
      • Zameer

        on   said 

        Any information about Zaraj Housing society Islamabad/Rawalpindi
        I visited it today and found it’s location to be very good … Just opposite to Giga Mall (Hyoerstar) in DHA 2 Islamabad n on main GT Road. For some reason, I find it more convenient than Bahria phase 8 … But I don’t think it will have same standards of Bahria security n electricity n other services

        Reply
        • Zameer
          Its location is very attractive indeed and good for long term investment
          Security is not an issue as level of security is very low in Pakistan at the moment
          Services are not bad either
          But if you want to invest, at-least invest for 3 years so that you can weather the storm of property crash in Pakistan.

          Reply
  4. RIZWAN

    on   said 

    DEAR GHAR47

    ANY UPDATES ON THE PROPERTY MARKET VIEWING PANAMA CASE IN SIGHT WHAT DO U THINK THE CASE IS HEADING?

    Reply
    • RIZWAN
      Time and numbers doesn’t count in biggest events
      Panama Case is D-DAY for Pakistan, today or never
      Case is heading in the right direction. Judges just taking enough time that no one complain that they were not given the time
      First time Pakistanis will win
      PANAMA CASE DECISION AND PAKISTAN PROPERTY MARKET
      Effects can be seen already
      Launch of new projects record low (sign of real estate market)
      File transfer in DHA Lahore record low
      Property transactions in Pakistan record low
      No black money investor is willing to invest in property sector as they will be questioned in the future about their source of money
      In shaa ALLAH prices are subdued in DHA Lahore and will sharply crash after PANAMA CASE DECISION

      Reply
  5. Muhammad azeem yddin

    on   said 

    Sir I have been heard that three project have been cancelled from the CPEC list about usd 3B.

    it has also comes to my knowldge that CEPEC investment is from Chinese bank having very high mark up 8.25% which is not viable at any project and it can not returnable.

    what would you think about real estate market of this things are happening like this?

    Reply
    • Muhammad Azeem Yddin
      These are just rumors
      CPEC work is in full swing and will be completed on time
      Yes Pakistan have signed some investment projects and sold bonds on high rates which is very disturbing
      But its true that Pakistan economic condition is very bad as we can see slide of PKR against Dollar
      Pakistan property sector is stagnant and soon prices will fall for the good of common Pakistanis.

      Reply
  6. Zameer

    on   said 

    Well is it right time to build a house on a plot in Bahria Town Phase 8? For living or along
    Cause what if after crash or decline in market, people stop investing or buying already built houses. We already see empty houses in these socities. Any advise?

    Reply
    • Zameer
      I will suggest you to wait for crash to complete
      DHA & BAHRIA Town are the societies where property speculation is high and so are the chances or great price fall
      Its better to wait 2-3 months as you will see biggest property crash in history of Pakistan.

      Reply
  7. Nazish fatima

    on   said 

    Sir
    It has been seen that stock market from 32000 points have started to increased and stop 51000 point.
    In this period their is no industrial growth .. no export increases.. and even remittencec is also low.
    It means few strange hand behind and they have decide to reach this level.
    Similarly I have seen just during the period of 18 months the prooerty prices have increased about 300% I mean RS 8 m plot have settle RS 24million. It means few strange hand settle the level of price to take the highest reach.

    Now I have read all the views of people and my conclusion is the prices of property and stock market are being increased to be settle the few strange hands. Kindly try to understand that if these few strange HANDS want to reduce it then prices will reduce. You are living upper world by Allah and in land few strange hands.
    So if Allah want then property prices will reduce or FEW STRANGE hands.
    In Pakistan you never can uses any financial laws to calculate price. If you people don’t know FINANCE then kindly ask any FINANCIAL ENGINEER that during last 10 years the prices increased according to any LAWS. No sir…. no..no….

    Reply
    • Nazish Fatima
      Fully agreed
      Pakistan stock exchange and Pakistan real estate sector is hijacked by mafia. People with black money have made the life of common Pakistani very miserable. SC vs mafia is stunning episode to free Pakistanis from chains. This crack down on black money will crash property prices.
      HINT
      People with black money are fleeing Pakistan with their money and stock exchange is crashing
      Same will happen to reality sector.
      Just wait and see

      Reply
  8. I. khan

    on   said 

    Although some people in the Middle East have lost jobs the overall drop in remittances has been only 3 percent . If devaluation
    Takes place expatriates will invest in property .
    Black money will continue to generate as long as business dealings in cash remain . Also , this money will continue to be invested in property as long as DC rates and FBR property rates are lower than the market prices .
    With the current political conditions not much is expected to change . May be after the elections .
    Therefore , I still hold my view on stagnent property prices up to elections whenever held .

    Reply
    • I. Khan
      Your argument is strong
      BUT
      Mega corruption cases are about real estate too
      SC is investigating the property scams too
      Crack down is on black money
      When people with black money are hiding their money and are not investing in property sector
      Prices will fall
      Simple fundamental is demand. When demand is low, prices will fall.
      Property transactions in DHA Lahore are record low. Same is true in Islamabad and Karachi.
      Launch of new projects is also low
      People with black money are running away to other countries for safety
      EXAMPLE
      Near crash of stock market
      Stock market is low to the level of December 2017.
      WHY PROPERTY PRICES CRASHED IN 2005
      People sold out properties to go back to USA
      Low investment in real estate sector is low prices
      LETS SEE WHAT FUTURE HOLDS

      Reply
  9. PML-N Lion

    on   said 

    Allah Pak Pakistan PML-N Nawaz Sharif Maraym Bibi ko har case main baizat bari kare. Yeh PML-N he ha jis ne taxes increase kye hain tu property price down hoye ha. Hamain corruption ke khalaf bat karne chahye. PML-N se ziada kon corruption ke khalaf ha. PML ka door zardari se bahhot behtar ha. Nawaz Sharif qadam barhaoo ham tumhare sath hsi

    Reply
    • PML-N Lion
      No one is against PML-N. Millions of Pakistanis love PML-N.
      Its true that high taxes by the government has reduced the property prices.
      Every Pakistan just want corruption free Pakistan where education, medical facility and housing is free or easily available.
      A CORRUPTION FREE PAKISTAN.

      Reply
  10. I. khan

    on   said 

    You might be right but you appear to have missed out on the following when comparing with 2005 :
    1. The population of the country has increased by around 40 million
    And continues to grow .
    2 . The agriculture produce prices have gone up tremendously and people have had more money in the villages and are moving to cities and towns .
    3. This govt has not allowed the Rupee to devalue as per the market . This is not sustainable and the devaluation will happen . The only question is when ? Perhaps before the next elections .
    4 . CEPC impact

    All these areas will not allow the property prices to crash as in 2005 . May be they remain stagnent

    Reply
    • I. Khan
      Good arguments but you missed the main point;
      When majority of Pakistanis cannot afford to buy property, who is the buyer then?
      A- Pakistani expatriates
      B- People with black money
      Pakistani expatriates are loosing jobs due to melt down in Middle Eastern countries (oil prices are low due to introduction of electric cars, Netherlands will ban petrol/diesel cars by 2025 and India in 2030, just electric cars)
      Pakistan black money investors are hiding due to crack down on black money.
      INTERNATIONALLY one can buy property with 4-5 years of income but in Pakistan ratio is 14.
      Pakistan residential land/property is controlled by few people. When it is handled properly we will see massive property price crash in Pakistan.

      Reply
  11. Hina Ali

    on   said 

    Agar property bubble 2005 se bhe bara ha tu property market ka Allah he hafiz. Yani ke chances hain once again 65 percent price fall ke. Aam admi ke kye tu bahoot acha ho ga lakin jin logoon ne recently property buy ke ha woh tu pit gain ge. Ap ne aik blog main kaha tha ke property price Dubai main low ha from peak in 2008. Tu kia Pakistan main aise ho sakta ha ke agle 10 years prices low rahain?

    Reply
    • Muzamil Imtiaz

      on   said 

      True. Atleadt someone in Pakistan cares about public needs. Hope property price crash soon so that we can buy property at affordable rates.

      Reply
  12. Rizwan Hashmi

    on   said 

    As you have mentioned in your blog that there is a price crash in property sector, will this price crash will affect projects like bahria town Karachi or dha city karachi?

    Reply
    • RIZWAN
      SC has accepted the JIT report and will announce its decision about PANAMA CASE
      For a hint about the future direction; SECP paper tampering case is the eye opening
      Wait a see
      Very soon we will that MEGA CORRUPTION cases are opened and in Pakistan all corruption is through real estate
      If majority of corruption happened in last 10 years so was the real estate boom in last 10 years.
      Property transactions are historic low in Pakistan.
      SC is already investigating the property scams cases in Karachi and Islamabad. China cutting etc.

      Reply
  13. Iftikhar Ahmed

    on   said 

    Dear Ghar 47 blogger ,

    its wishfull thinking , there is no crackdown on black money what so ever.
    you can say its our desire that prices go down and SC take action , I don’t see it happening or may be I am following wrong news channels/reports.
    good effort on your part hope it ‘ll came true.

    regards
    I Ahmed

    Reply
    • Iftikhar Ahmed
      Its written on the wall
      JIT report has been submitted but SC has to announce the final decision about PANAMA CASE
      Lets first see the outcome.
      SECP paper tampering is an eye opening case we should think seriously.
      SC is tracing records of housing schemes
      Very every thing will be clear.
      Right now, DHA File transfer is historic low
      Hope for best
      Crack down on black money is written on the walls
      Prices will fall to historic low

      Reply
    • Iman Ali Noor
      Price crash this time will be bigger than price crash of 2005. Reason is that in 2005 black money was not chased but this time SC is ruthlessly chasing the black money. Abnormally high property prices in Pakistan are not due to economic growth but just because of black money.
      People who wan to buy will get cheap properties in future but at the same time many people will sustain huge losses.
      In 2005, 1 Kanal / 500 sq yards plot in DHA Lahore had price 1.5 crore and after property crash new price was 50 LAC. So 65% price crash.
      Personally this time I see bigger crash.

      Reply
    • Balkees Khan
      Yes, Pakistan property market is stagnant in Pakistan due to high taxes, political turmoil, JIT and economic slow down in Middle Eastern Countries as oil prices are low.
      Its really hard to predict the crash percentage but one thing is for sure; this will be the biggest crash in Pakistan history and people will forget Pakistan real estate crash of 2005.
      I see 40-60% price crash as prices are abnormally high due to black money.
      We can easily assume that what will be the prices without black money.

      Reply
  14. RIZWAN

    on   said 

    in sha ALLAH hard crash so that everyone can afford to buy homes…as it is unlikely that there are salaries rising to such a gr8 extent

    Reply
    • RIZWAN
      Agree
      Pakistan need hard crash if for its survival other wise two options. 1- Social unrest 2- Slavery in form of rent slavery
      In shaa ALLAH we are already in hard crash phase as no sale purchase in DHA Lahore as black money heroes are hiding in bushes as SC is doing ruthless crack down on black money.

      Reply
    • Hina Ali

      on   said 

      Aameen. But donot know why other property websites and news websites are not writing about link of Panama Case. Allah kare hard crash ho

      Reply

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