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House Price to Income Ratio in Pakistan

House Price to Income Ratio in Pakistan

House price to income ratio is a measure which shows the house affordability level of a certain region. High house price to income ratio is the sign of an unaffordable housing market, whereas low house price to income ratio is the sign of an affordable housing market. In this blog we will discuss the house price to income ratio in Pakistan.

What is the affordable house price to earnings ratio worldwide?

House price to income ratio is measured by calculating the years of income required to buy a house. This formula is widely used by the banks to provide the mortgages. An affordable housing market is one where people can buy houses by spending five years of income. Housing market below this ratio is considered as very affordable, whereas above this ratio is considered as unaffordable.

What is the house affordability ratio in Pakistan?

Pakistan has one of the most unaffordable housing markets of the world. According to the NUMBEO, 2018 house price to income ratio of Pakistan is 1:11. So a person has to pay 11 years of income to buy a house in Pakistan. Whereas for an affordable housing market in Pakistan, the house price to income ratio should be 1:5.

Reasons of high house price to earnings ratio in Pakistan

First reason is the fast rise in inflation as compared to the wages. Second reason is the low purchasing power due to the economic decline. Third reason is the huge influx of black money into reality sector which has artificially increased the house prices. Fourth reason is the lack of affordable housing initiatives in Pakistan.

Measures to increase house affordability in Pakistan

House affordability in Pakistan can be increased; firstly by controlling the inflation, secondly by creating good paying jobs, thirdly by curbing the flow of black money into reality sector and fourthly by starting housing benefits. The Federal Government and Provincial Governments of Punjab & KPK started the affordable housing schemes but scale is very limited.

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(12) Comments

  1. muhamamd azeem uddin

    on   said 

    sir,
    from the launching time period it is gain 20% and it has already on web site of Fazaia.

    my question from you that : the price is going downward trend in the city,, then how this possible Fazaia housing is becoming gaining price?

    Behria town karachi , 200 bunglows selling price is 70 lakh,, BTK much good position and more near from city.

    It do not seems on Fazaia housing 20% gain by SATTA/ gambling culture and nothing else???

    as your previous prediction price will be further decline about 50%, so after that who will buy fazaia RS 1.51 crore, it means he will lost ??

    waiting your opinion.

    Reply
    • Muhammad Azeem Uddin
      Valid point. Property price fall is written on wall. Prices are constantly declining. The pace of price fall is slow in some areas but fast in others. The only area which was in good condition was, BAHRIA TOWN KARACHI. Now even BTK is down as prices are falling.
      PAKISTAN REALITY SECTOR IS FACING THE PURCHASING POWER CRISIS:
      Main reason of property price fall in Pakistan is the blockage of black money. Without black money property prices are falling. As people with white money have low purchasing power so prices will keep falling.
      PROPERTY PRICES ARE FALLING TO IMPROVE THE AFFORDABILITY OF BUYERS;
      House affordability level in Pakistan will be improved in 2 wats
      1- PRICES WILL COME DOWN TO THE LEVEL OF AFFORDABILITY OF GENUINE BUYERS
      2- SALARIES OR PURCHASING POWER WILL INCREASE
      Pakistan reality sector will be stagnant for many years to come.

      Reply
  2. Nazish Fatima

    on   said 

    dear sir,

    what is views about fazaia banglows M9, the offered price for 240 Sq/yard double story bunglows at this moment RS 1.51 crore. it is not very expensive if we compare this from gulshan e maymer and scheme 33 societies where double story bungalows is available RS 1.3 to 1.45 crore. so one can buy from bank loan and installment can be paid by the support of rent.

    i think fazaia is selling quite higher price and is very far from the city. which is beyond to understand.

    what you predict and analysis??

    Reply
    • Nazish Fatima
      The launch price was 66-124 LAC
      ALREADY 20% GAINS BY EARLIER INVESTORS
      125 SQ YARDS DOUBLE STOREY BUNGALOWS – PRICE = 81 LAC
      Its 275 SQ YARDS DOUBLE STOREY BUNGALOWS – PRICE = 1.519 CRORE
      Prices are affordable as compared to other societies
      PLUS POINTS OF THIS SOCIETY ARE;
      1- LOCATED on M9 which will be used for CPEC. Government has planned the infrastructure development of the surrounding areas.
      2- 5 YEARS INSTALLMENT PLAN
      So people who can invest and wait for 5 years, should invest. Its a long term investment.

      Reply
    • Zahid Ali

      on   said 

      My understanding is that house constructed by big contractors/developers (even by bahria town) are not of super quality. Al-hira banglows gulistan e jauhar, Saima Villas in surjani town, arsalan homes (4J last stop) etc, etc are all low quality construction.

      I think (I am not sure)that Bahria town 200 yard banglows are not on column, rather it is on load bearing walls. The middle wall of two houses are common. I didnt like the construction once i visited the bahria town. They only emphasize on finishing. Fazaia may also be same type of low quality construction.

      Up to 3 stories one can easily built low cost houses on load bearing walls. Scheme 33, saadi town, gulshan e maymar etc houses constructed by small contractors are much better than the houses constructed in bulk by giants contractors.

      This is my personal opinion without any experience. Any civil engineer should describe the quality of houses in this blog constructed by big contractors in bulk quantity.

      Reply
  3. Nazir Ahmed

    on   said 

    Dear Sir,

    Please suggest what is the best time to purchase flat in Karachi and what you expect, how much pricing will decline.

    Regards

    Reply
    • Nazir Ahmed
      Property prices are falling at the moment but the process will take some time to complete. First let the prices to bottom out. Prices are 20% down and another 30% decline is expected. We regularly write about market situation so we will let you know about the time to purchase property. Wait of couple of more months at least.

      Reply
  4. Muhamamd azeem uddin

    on   said 

    dear sir,

    i want to draw your attention DHA city karachi, it is very far from karachi city , if someone live at their then it is very difficult for him to work at city center karachi.

    if we look the plot prices it is also beyond to understand why the prices are soaring. i have meet few people who have invest , they told that they have invest just they think that they can be able to get good profit their, but none of them agree to go their to live ??

    similarly on last sunday i have visted with an agent at TNT society karachi scheme 33, block 26A.

    where 400 SQ/Yard plot price is ranging from 42 to 48 lakh.
    Their is no gas line, no electricity, no water line, nearby no population at the society as well as nearby all are vacant.

    it seems that at least it will be livable about need 10 to 15 years. i am unable to understand that their is no means to invest ? It is far better to invest Rs 40Lakh in any business that may be crate job as well as a lot of opportunities to make more money and good , enjoyable life.

    sir kindly give your opinion and technical analysis

    Reply
    • Muhammad Azeem Uddin
      High property prices in the area without developments is the sign of massive investment. Most of the investment is in form of black money. So property is used to whiten the black money.
      But prices are falling now and home affordability will start improving.

      Reply
  5. Zahid Ali

    on   said 

    I have heard a news from a whatsapp group that Bahria Town Karachi prices also started decreasing. Although this news is still not confirmed from any other source.

    If anybody in this blog have any direct experience of Bahria Town Karachi sale and purchase, then please share the same on this page as far as Bahria Town Karachi prices are concerned.

    Reply
    • Zahid Ali
      Its a fact that prices are slowly declining in BTK. During initial price fall stage, many real estate agents went to Bahria Town Karachi who are returning now. A clear sign that BTK is also not performing good.
      TAX AMNESTY SCHEME:
      Property tax amnesty scheme is not possible in Pakistan in the current scenario. Tax amnesty scheme is to pay 3% tax to whiten your money. BUT PROBLEM IS; Why Mian Muhammad Nawaz Sharif, Ishaq Dar, Imran Khan and Jahangir Tarin khan were not allowed to avail this type of schemes by SC?
      Any future amnesty schemes attempts will be challenged in the court.
      PAKISTAN IS SIMPLY MOVING TOWARDS FAIR PROPERTY MARKET WHERE ONLY THOSE PEOPLE CAN BUY REAL ESTATE WHO CAN SHOW THE SOURCE OF INCOME.
      50% PROPERTY PRICE FALL IS WRITTEN ON THE WALL. ALREADY REAL ESTATE PRICES ARE 25% DOWN FROM PEAK OF 2016.

      CURRENT SITUATION; HOUSE PRICE TO EARNINGS RATIO IN PAKISTAN
      Due to high HOUSE PRICE TO INCOME RATIO IN PAKISTAN, home ownership is declining but renters are increasing. Its very hard to buy a home in Pakistan due to highly unaffordable properties. Thing are moving for the better.

      INCREASING HOUSE AFFORDABILITY IN PAKISTAN;
      1- Prices should fall to the level where people can afford to buy homes for living
      2- Government should start the affordable or government housing nationwide

      Reply
      • Zahid Ali

        on   said 

        Great Point

        Property tax amnesty scheme is not possible in Pakistan in the current scenario. Tax amnesty scheme is to pay 3% tax to whiten your money. BUT PROBLEM IS; Why Mian Muhammad Nawaz Sharif, Ishaq Dar, Imran Khan and Jahangir Tarin khan were not allowed to avail this type of schemes by SC?

        Reply

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