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Pakistan is moving towards fair property price

Pakistan is moving towards fair property price

High property prices in Pakistan were due to the unchecked inflow of black money into real estate sector. SC has started the ruthless crack down on black money and we can see decline in property prices. Property prices are still out of the reach of most Pakistanis, but at least price fall has started which is good for genuine buyers.

Now it’s buyer’s market in Pakistan

Buyer’s property market is one, where properties are more than the buyers. In this scenario, buyers are at advantage as they have more property options and good price bargain. Due to the property price fall, genuine buyers are at the driving seat. Crack down on black money has started the golden era for genuine property buyers in Pakistan.

Pakistan is moving towards fair property price

Property prices reflect the purchasing power of buyers. Greater purchasing power means that property price is high and vice versa. Property prices in Pakistan were always fixed by the people with black money. This is why we have seen in past that property prices were rising overnight due to huge influx of black money into real estate sector.

But now this has changed in the favor of genuine buyers with white money. Prices are falling as genuine buyers with white money have less purchasing power. Now property prices will be determined by the purchasing power of genuine buyers. Prices will keep falling to the point where genuine buyers will be able to afford properties.

Now Pakistan has entered the golden era of fair property price, as property prices will be what buyers could afford. The time of day trading has ended as houses will be only for living. But we must know that properties are still 35-50% overvalued according to the purchasing power of genuine buyers. Just fasten your belts as ride will be very bumpy.

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26 Comments

  1. Hi

    I don’t understand you keep saying that prices will fall prices will fall while on the other hand I have seen rise in prices, There might be few dealers who had told you for things not get sold but point it there is constant increase in prices, few months back IEP Town Lahore I was thinking to purchase a kanal plot which was of around 60lac but now same plot demanding price is 75 lac. Same goes with lake city, Awt.

    Dream garden phase 2, 10 marla plot of 1crore, even on 4 years instalment plan it is way more expensive.

    Give me a name of single society where you have seen price fall in Lahore ? You can found 2 3 cases of bahria town or dha but overall there is no effect on price fall.

    Prices might get stable for a moment but fall doesn’t sound right to me.

    Would love to have your thoughts.

    Thanks
    Regards

    Reply
    • Fahad
      Prices are falling but price fall is slow
      The prices you are mentioning are the asking prices not the prices on which prices are sold out. There is huge difference between both.
      Bahria Orchard Phase 4 recently launched is in minus
      Lake City Lahore launched the new booking of 5, 10 & 20 Marla. The project is in minus
      Bahria Sports City Karachi is not sold out even after 1.5 years of launch
      Apartment project on Canal Bank road Lahore has reduced prices by 35% but still 70% project is unsold after 20 months
      There are many more examples
      PAKISTAN IS FACING THE AFFORDABILITY CRISIS
      Black money investors are out
      Property worth 50 LAC is better but high end property market is crashing
      Pakistani real estate sector is alcoholic of black money
      Without black money prices are falling
      PROPERTY PRICES ARE FALLING DUE TO
      Instability in Pakistan
      Political turmoil
      Low foreign remittance
      Falling economy
      Falling rupee value
      MARKET SITUATION
      Only sellers not buyers
      Sellers are desperate to less the houses, plot to minimize the future losses but still no buyers even after reducing the asking price by 20%
      Buyers on driving seat as will only buy the property which is real affordable

      Reply
  2. Adnan Shaikh

    on said  

    How can u peoples say that prices will go down ? I did not see any crack down against corrupt politician’s and government officials specially in Sindh province ( i am also working in a government department in Karach) and these politicians and officers still very easily purchase and sell their properties in Karachi and no body ask them how they earn these huge amount….bhai kuch nahi hona ye pora system corrupt ha or by the way one of the major reason of inflate prices of property is intrest rate which was down by Ishaq Dar from 13 percent to 5 percent and this was the reason many invertors and also industrialists invest their savings in the property sector ( i know many investors and industrialists who withdraw their money from banks and invest in property sector.because no much intrest rate but huge gains in property sector) and these investors and industrialist have legalise money and when i was start searching for purchasing my home since 2 years in Karachi, one very surprising thing i observed that in many renowned projects like lucky one towers, saima presidency (upper tower of imtiaz store), ocean mall clifton, saima one mall towers , kings palm towers and many more, the investors already book the whole floor immediatley after project launch so after that they make monopoly and set the price of property and every one follow the same price….bhai koi price kam nahi hone khuwaboo se bahir niklo or haqiqat ki dunya mein ayoo…pechle 2 sal se wait kar raha tha mein price kam hone ka or isi site ko.follow kar raha tha lekin jab mujhe pata chala k aisaa kuch nahi hone ja raha ha recently then i purchased my home…

    Reply
    • Adnan Shaikh
      This is the general perception
      But thing are moving in the right direction
      If SC can question Main Muhammad Nawaz Sharif & Imran Khan Niazi, be calm SC will ask everyone. People are monitored everywhere.
      No one is above law.
      Wait and see

      Reply
    • DEAR ADNAN BHAI

      I ALSO LIVE IN KHI ….AND AM LOOKING FOR A HOUSE….AND TRUST ME THERE IS NO WORK GOING ON IN PROPERTY MARKET…IT IS DEAD AND PRICES HAVE STARTED FALLING….THERE ARE LITERALLY NO BUYERS IN THE MARKET…AND SELLERS HAVE STARTED BECOMING DESPERATE AS EXTREMELY LITTLE PROPERTIES ARE BEING SOLD….THERE IS NO WORK GOIN ON IN THE PROPERTY MARKET…BROKERS ARE PLEADING AND GIVING FAKE INFO TO BUYERS SO THEY GET INTRESTED IN BUYING BUT STILL NO BUYERS AS PRICES WERE TOO HIGH….DAYS OF PROPERTY MARKET ARE IN SHA ALLAH OVER…..AND HOPE PRICES COME CRASHING DOWN SO EVERYONE CAN A BUY THEIR OWN HOUSE

      Reply
  3. Here’s an example of what a slow or stagnating market looks like in its movement towards fair market value.

    Let’s take a certain clutch of houses like the Naval Housing Society (NHS) in Clifton, Karachi. In second half of year 2012, the value of a 350 square yard two story house was around PKR 3 crores & 50-75 lacs, which was considered high enough at that time. It was equivalent to price of a 500 square yards house in parts of nearby DHA outside of the compound.

    Over the next 4 years or so, the asking price of these NHS houses shot up to over PKR 10 crores, roughly equivalent to some of the older 1000 square yards DHA houses.

    That’s the proverbial Up Swing.

    Those were the years when security situation in Karachi – to put it mildly – was precarious. There was a huge movement of people from outlying areas of Karachi, trying to move inwards to ‘safer’ areas like Clifton or DHA. Houses within a compound obviously went for a premium.

    And then operation cleanup began in earnest and normalcy started to return to a broken & badly bruised city.

    However, the residents of NHS got stuck to the nostalgic notion of a 10-crore value that their 350 square yards houses had attained in the meteoric run up.

    Now that most ‘investors’ are laying low or preparing to flee before law gets hold of them, it is proving almost impossible to find a buyer willing to cough up that much money, and that too white money. A bit of a challenge I would say.

    In a complex with say, 250 or 300 houses a normal well-functioning market would have meant that at least 10% of the houses are sold in any 12 months. In case of NHS it should mean 25 – 30 houses exchange hands between willing buyers and sellers. It also implies that if conditions were good, a house on sale would get firm offers within 3 – 6 weeks of being on the market.

    Of course as values climb number of transactions go down. When values become very unreasonable given the general market conditions, months go by and houses could not be sold

    Here’s what the current conditions are:

    • Law and order situation has improved considerably from what it used to be in 2010 – 12. While walled compound are still valuable but not like when Karachi was literally coming apart at the seams due to dire security conditions

    • Property cycle or decade cycle is increasingly manifesting itself as 2017 draws to a close

    • Black money is being chased

    • Indications are that in near future the days – of unchecked tax evasion, and illegitimate wealth that needs to be whitened or laundered specially via property deals – are numbered

    • Many so called ‘investors’ are headed for jail where they belong.

    These factors have started taking their toll on open plots of DHA. The tide has started to sweep over over-priced houses as well, including those in NHS.

    Now there are houses that have been on sale (at that ‘premium price’) for over 6 months without buyers with firm offers willing to dish out 10 crores. So compare the 3 – 6 weeks of bygone glory days to going dry for 25 weeks and still no thirst quencher in sight.

    What is the obvious solution so that supply could equalize demand? There is no way white money could come up to those levels, hence those lofty levels need to go down. Obviously, the sellers having once tasted a dream price try level best to maintain it & even raise it. Given 250 – 300 houses, even if a couple of houses still manage to be sold at the dream price ….during a span of several months, then I am afraid that does not make for a robust market. In fact, it’s a market cracking up under weight of unreasonable prices and generally down market conditions.

    For NHS the reverse cycle in now effect i.e. value of DHA 1000 square yards house is dropping so the corresponding NHS 350 square yards finds it difficult to keep clinging on to a 10-crore value. It’s making its move back to being equivalent to value of a DHA 500 square yards house …an old one at that. Remember, it’s basically value of land in NHS as most houses are of old (and not so good) construction. Simultaneously, value of old 500 square yards house in DHA is also under pressure.

    That’s the proverbial Down Swing.

    The cycle would be complete when values in DHA and NHS go back to the rates prevailing in 2012 or 2013. Sounds incredible? Well that is the likely point where demand – based on white money – waits patiently for dreamy eyed sellers to come down to reality.

    In other words, values within NHS are set to drop by a jaw-dropping 50-60%.

    Because like it or not, going forward black money is not going to affect things as it has been doing for last many years. It’s affecting all high value projects in DHA and Clifton. Walled compounds also cannot escape that reality creeping up on them.

    Reply
    • Zahid Ali

      on said  

      Hasan
      Nice explanation
      I have one question in my mind. Amnesty scheme for real estate sector is still valid. Then what is the problem in purchasing property with black money?

      Reply
      • Zahid Ali
        Good point
        People who are holding black money are afraid of amnesty scheme
        Already very few people have availed this scheme as they think its a trap.
        AMNESTY SCHEME IS USELESS IN THE CURRENT SCENARIO
        KHAN SB, MIAN SB, ISHAQ DAR are asked by SC to show the proof of income or money trail
        ASSETS BEYOND MEANS
        So if top leaders are asked about money trail do you think any simple person with black money will ever dare to buy property in this situation?

        Reply
    • Hasan
      Many thanks for very detailed analysis
      I would like to add few recent observations
      One of my friend is permanent resident of UK, LONDON
      I told him to buy a home, why do you live on rents.
      He told me that property prices in UK are artificially high due to abnormally low interest rates. His friends are bankers. They tell him that bank interest rates will not keep record low for long time and when interest rates will start rising, it will be hard to pay mortgages. Due to which prices will fall and foreclosures will rise.
      SAME IS TRUE IN PAKISTAN
      Prices were always artificially high due to the huge influx of black money.
      Now black money is chased so its like an affordability crisis in Pakistan.
      Honest tax payers have low purchasing power.
      So we have two cases
      1- Prices will come down to the level where honest tax payers can buy properties
      2- Massive wage rise to match the present prices.
      Second case is hard to meet as Pakistani economy is on verge of collapse.
      ECONOMY VERSUS HOUSE PRICE
      Rising economy = More purchasing power = High property price
      Falling economy = Reducing buying power = Low property price
      PAKISTANI ECONOMY IS FALLING APART
      State Bank of Pakistan has loaned from local private banks. Many economists say that without seeking help from IMP, Pakistan cannot make next budget 2018-19. So when economy is falling how property prices will remain so high?
      WE ARE HEADING TOWARDS HARD PROPERTY PRICE CRASH.

      Reply
      • Zahid Ali

        on said  

        Agreed

        In Canada, one of my friend just bought a house on 3.05% interest rate. Before the interest rate was about 2 percent. That was the time when real estate prices were going high. Now the market is stagnant.

        Reply
        • Zahid Ali
          This is the real trap for Western Nations
          They want to increase the interest rates but mortgage payment will be un-affordable. House prices will fall and foreclosures will increase.
          RESULT- ARTIFICIAL PROPERTY BOOM IS ALWAYS FALLOWED BY HARD CRASH
          Black money in Pakistan has resulted in abnormally high property price. Without black money prices are falling.
          Its like affordability crisis in Pakistan.
          WHO CAN BUY 10 CRORE VALUE HOUSE WITH WHITE MONEY?

          Reply
  4. What are indicators of price fall?
    I have yet to see any price fall in Bahria n DHA Islamabad.
    Prices are same or some what dropped by 5 lac max on Zameen dot com. I am not much aware of on ground prices though as I’m not in Pakistan.

    Reply
    • Zeeshan
      The ground reality is very different
      Asking price in Bahria Town & DHA Islamabad is 20% down
      Prices are 10% down
      You will only find the sellers
      Its hard to find the buyers
      Prices are falling and will keep falling to the point where people with white money can afford it.
      We are heading for big price crash
      Its not the time to buy proeprty
      Buy property in early 2018 when prices will bottom out.

      Reply
  5. Ali Asghar

    on said  

    Dear Author,
    Wth record trade deficit do you see any impact on property with certain
    Rupee devaluation. How the inflation will playout in real state industry?

    Reply
    • Ali Asghar
      RISING ECONOMY = Low inflation
      FALLING ECONOMY = More money printing = High inflation
      Low inflation = Strong currency = Strong buying power = More INVESTMENT IN REALITY SECTOR = Price rise
      AT the moment Pakistani economy is falling apart
      As per many News Channels and websites, Pakistan State Bank will have no money in MARCH/APRIL
      PAKISTAN WILL HAVE NO MONEY TO MAKE BUDGET 2018.
      When economy is falling, people are worried about bread & butter not about REAL ESTATE INVESTMENTS
      WHERE PEOPLE WILL LOVE TO INVEST? NIGERIA OR USA?
      Simple answer is that people will invest in the country or city whose economy is booming

      PAKISTAN REAL ESTATE HISTORY IN WAKE OF ECONOMIC STRENGTH
      Pakistan observed its first real estate boom from 2003-2005.
      REASON:
      Booming economy
      Low inflation
      Low interest rate
      FALL IN 2005
      Falling economy
      High inflation
      High interest rate
      CURRENT SITUATION:
      Very soon State Bank of Pakistan will be forced to increase the interest rate to control the inflation due to deficit
      This will further crash the economy
      Due to which people will be worried about living expenses and investment in real estate sector will reduce
      LOW INVESTMENT = LOW PROPERTY PRICE
      PROPERTY PRICE FALL IS WRITTEN ON WALLS. WE ARE HEADING TOWARDS HARD PROPERTY CRASH

      Reply
  6. Dear Author, Will the prices of DHA lahore will also fall ? as there is a huge demand always for DHA & people love to invest there. I personally want to buy a 5 marla plot but it is still quite expensive.

    Reply
    • Awais
      Yes prices in DHA Lahore will also fall
      AND
      In-fact property prices in DHA Lahore are falling. price fall is slow but steady
      DHA Lahore is the market of black money as we cannot buy 33 crore property with white money
      Without black money high property prices will fall.
      Asking price is 20% down from peak 2017.
      So prices are falling in DHA Lahore, bahria and other areas. Its better to wait a couple of months so that you can buy cheap properties.

      Reply
      • Dear Author, Thanks for the reply, I have a 5 Marla plot in new mozang, I do not like the area much but I have two options, either construct house their & start living or either sell it & buy land in DHA & then construct house. Which option is better in terms of current market situation also I am spending too much money on rent(50k Rupees). Your suggestion would surely help. Regards

        Reply
  7. Zahid Ali

    on said  

    http://epaper.brecorder.com/2017/09/30/1-page/673650-news.html

    London house prices fall for first time in eight years

    LONDON: Property prices in London have fallen for the first time since 2009, as rising inflation after last year’s Brexit vote hits Britons’ purchasing power, according to an index published Friday.

    Average home prices in the capital slid 0.6 percent in the third quarter or July-September period compared with a year earlier, home-loans provider Nationwide reported in its latest survey. That was the first year-on-year decline in the index for London since the third quarter of 2009.

    However, Nationwide also said that average prices across Britain rose 2.2 percent over the same period from a year earlier.

    “Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appear to be weighing on confidence,” the lender said in a statement. The average price of a home in London was almost £472,000 (535,000 euros, $632,000) in the third quarter, more than double the national average of £211,000, according to Nationwide.

    British households’ purchasing power has taken a hit because of the rising cost of imports after last year’s referendum vote to leave the European Union, which pushed down the value of the pound.

    British salaries fell by 0.4 percent between May and July compared to the same period a year earlier when adjusted for inflation, recent official data showed. Britain’s property market could also suffer if the Bank of England were to raise its main rate from a record-low of 0.25 percent, which would push up the cost of mortgages.—AFP

    Reply
    • Zahid Ali
      WORLDWIDE ITS A PROVEN FACT THAT REAL ESTATE SECTOR IS USED TO WHITEN / PARK THE BLACK MONEY
      London/UK property market has similarities like Pakistani property market
      BOTH MARKETS PROSPER ON BLACK MONEY
      London is the house of world’s biggest tax evaders
      Pakistani top cities are also hub of black money laundering
      DUE TO BRIXIT
      People are moving to other countries so less demand for property = LOW PROPERTY PRICE
      IN PAKISTAN
      We are facing the affordability crisis in PAKISTAN
      Historically Pakistan real estate sector is alcoholic of black money. Half of Pakistani population is living below poverty line. People are forced to sell their kids and body parts and still so expensive properties? HIGH property prices in Pakistan are just because of black money. Pakistan is right now facing the affordability crisis. When black money is out, who will buy the expensive properties? Actions of NAB, FBR & SC has discouraged the black money holders. When investment is low in real estate sector, property prices start falling. This is what is happening in Pakistan. Without black money prices will keep falling to the point where honest tax payers can afford to buy cheap properties.
      PAKISTAN IS MOVING TOWARDS FAIR PROPERTY PRICES, as black money is out and property prices in future will be what honest tax payers can afford.

      Reply

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