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Pakistan property sector after another interest rate hike

Pakistan property sector after another interest rate hike

State Bank has increased the main policy rate by 50 basis points. So interest rate has increased to 10.75% from 10.25%. The interest rate has been increased to control the rising inflation. Inflation is rising due to increase in crude oil price in the world market and also due to the depreciation of Pakistani Rupee. Let’s discuss Pakistan property sector after another interest rate hike.

How interest rate impacts real estate sector?

Increase in interest rate:

When interest rate increases, banks give more profit on the saving counts. So people sell properties and deposit their money in banks. The massive sale of properties results in capital flight from reality sector due to which property prices fall.

Decrease in interest rate:

When interest rate decreases, people get less profit on their saving account. So people withdraw money from banks and invest in reality sector. In short due to the rise in interest rate, investment in reality sector increases which leads to property price rise.

How interest rates have impacted Pakistan real estate sector in past?

Pakistan has observed two real estate booms in the 21st century. First boom lasted from 2003 to 2006 and the second from 2013 to 2016. The reason of the both real estate booms was the record low interest rates at 7.5% and 5.75% respectively. During both real estate booms, people got less profits on their saving accounts. So people withdrew the money from banks and invested in reality sector. The massive investments in reality sector resulted in property booms.

What is in store for Pakistan property market?

Pakistan real estate prices are in decline at the moment due to high property taxes, low investments and crackdown on black money. The volume of real estate transactions is record low whereas property prices are 40% down from peak of 2016. We are already facing the house affordability crisis and luxury property market is hit hard which thrived on black money. Now as interest rates are increasing, so the price fall will gain more momentum in the coming months.

Benami Act Implemented by Government


  1. Umer

    on   said 

    I see no update on this forum. Have we accepted the reality that no crash is happening? Govt is rather going to increase FBR values equal to market values for increased tax collection which means price are not expected to reduce anyway. Despite operation against mafia, high interest rate, FBR going against land mafia, nothing is apparently changing in this country. Instead, govt had to bow before mafia by offering amnesty scheme. Was it a waste of time for waiting for crash? Any thoughts here?

    • Umer
      Have you met any realtor? Ask them why their business is in decline. Simple answer will be the increase of property valuation by FBR.
      In future even less properties will be traded due to high transaction costs.
      Interest rate increasing.
      Inflation increasing.
      Economy declining.
      Rupee depreciating.
      Amnesty scheme failed.
      Pakistan property prices will remain stagnant for years to come like 2025.
      In real term due to rupee devaluation property prices are 40% low since June 2019.
      Property price peak of 2016 will not repeat before 2025.

      • Malik

        on   said 

        come on dear, from last 3 yrs u are misguiding public here. real estate business is down in volume but prices of plots are hardly effected. your baseless analysis are bothering everyone.

      • Umer

        on   said 

        Prices are already low 40% just because of PKR devaluation? Guess what? That’s a silly argument. You should have focused your analysis on foreign investors only who can gain out of this. Local investors have lost the equal value of currency as plots value so what’s the catch? I thought you would give smarter reasoning than that one!

  2. rizwan

    on   said 

    duniya newspaper main news ay hai k further 25% rate hike in fbr value from 1st july honay laga hai and jo bhi banda khali plot rekhayga and us per construction nai karayga us khali plot per heavy taxes lagnay lagay hain from 1st july …. and agar woh banda after 3 years baichta hai woh plot to save himself from cgt den also us per bhi heavy taxes lagayee jaingay us per….means open plot agar liya tu construction kero werna heavy fines and taxes lag jaingay…secondly source of income bhe poocha jaiga ab sab say even us say jisnay plot kafi arsa rekh ker baicha….

    plot prices will rock bottom is news k hisaab say kindly guide

    • rizwan

      on   said 

      i just asked a broker chohan estate in lhr about this…he said agar aisa hogaya tu sab kuch khatam samjhain app…
      kindly guide

      • Rizwan
        There are many things to consider. I will try my best to cover all.
        1- global trends:
        Globally many experts have predicted that property sector will remain stagnant till 2025. So prices will keep falling for another 6 years.
        I have discussed with many realtors. All say that market has no interest in amnesty scheme for real estate sector.
        WHY? Because there is no hope in new scheme as people never availed the old amnesty schemes.
        SECONDLY; most dealers and investors consider the new scheme as a trap by FBR.
        This news is true that government will increase FBR Property valuation rates to bring prices close to the market rates.
        Whatever law is or even an amnesty scheme; all buyers of property will be asked about the source of income.
        Pakistan realty sector will only pick after 2025 due to the real demand. Amnesty scheme is just a trap to bring the people to tax net plus NAB wants to know about the people with black money so that it can nail them properly.
        6- PAKISTAN REAL ESTATE is now for genuine people as days of black money and speculations are over.
        7- PAKISTAN PROPERTY PRICES will keep falling to the point where white money people can afford properties. So like DUBAI we will see 75% price drop from peak of 2016. If inflation is considered and price fall is calculated prices are already 50% down from peak of 2016. So another 40% price fall at current level is a must.

  3. Abdullah

    on   said 

    Well said. Currently we have trapped bulls in property market. Based on my experience in forex and stocks, till all trapped bulls totally lose hope of price hikes and sell in loss as they see some other asset class as opportunity being lost because of their capital locked in property. We will not see market being bottom out. Once we see panic selling the market will bottom out and bull market in property will start.

    • Abdullah
      Many people think that government will pass an amnesty scheme and it will up lift the stagnant property market. Unfortunately property is highly affordable in Pakistan. Rupee is sliding against dollar, unemployment is record high. Property in DHA is more expensive than the property in US or Europe. If Dubai property can fall by 75% then definitely Pakistani property market will touch the bottom sooner or later.

      • Fraz

        on   said 

        Anwaar sb

        Property price were its bottom previous days. Inflation has started increasing property prices.

        As a matter of fact, inflation increass peoperty prices similar to other commodities.

        You give dubai example in every of your comment that is not comparable. Dubai property system is dependant on mortgage. Money is invested in dubai from all over the world.

        Whereas pakistani property is onle dependant on local or overseas pakistanis. Finance minister has given the statement that rupee will not devalue further. Filer ban will be lifting soon. Overseas pakistanis were waiting for this time.

        Dha prices are much lower than any city of usa and europe.

        • Fraz
          Non filers will be allowed to buy property. But will they have to show the source of income. If not then why NAB is disturbing Nawaz Sharif and Zardari.
          Plus if amnesty scheme is for Pakistanis then why not for Sharifs and Zardaris?
          Why is there no amnesty scheme for Nawaz Sharif or Zardari. They are not Pakistanis?
          These are just promises and a grand trap. Whoever buys a property with black-money will visit the jail.

        • M ANWAR

          on   said 

          bahi sb, y u people not showing the actual market situation to the people. As in actual market, rates are going high.
          In DHA2 ISB, 5, plots of 1 kanal which were 8 million, now they are asking 11milliom. In gulberg isb, same is the situation. Then, how u can say, property is at bottom.
          I hope, u will reply

          • Ahmad

            on   said 

            Its a very interesting time nowadays.
            Those who want to buy property they are complaining property prices keep increasing and
            Those who want to sell property, they are complaining 50% of their property price already down and still no buyer is available. Interesting situation. Everyone is whining !

    • Farooq Lari
      Many amnesty schemes were offered in past but all failed.
      Interest rate is at record high in Pakistan at 10.75%. So little chance of any price gain.
      Currency devalued by 35% so properties are already 35% cheaper as people have lost 35% of their wealth.
      There will be no real property price gain unless interest rate decreases.

        • Rajab
          Gwadar Real Estate is dead at the moment due to two factors. Firstly NAB is investigating the massive scams in Gwadar. Secondly government is planning news laws.
          Gwadar real estate take a boost by year end or 2020.

      • Fraz

        on   said 

        Anwaar Sb

        As everyone has lost his 35 percent of wealth including buyers and sellers so overall effect of devaluation is 0.

        Yes properties are 35 percent cheaper even on same price but the purchsing power of genuine buyers is alsi decreased by 35 percent even with the same income.

        Net effect is 0

        I am seeing a sharp increase in property prices after lifting of non filer ban. Overseas pakistanis are eager to invest in property more than before as dollar is 143 now.

        • Fraz
          The market has not welcomed the news of the amnesty scheme so far due to two reasons.
          No amnesty scheme has given required results.
          Most people consider it a mere trap to grab the money. Just a way to know about the people who have got illegal money.
          One of the dealer was very disappointed today. He said if NAB can visit politicians homes for recovery of money, what they will do to the common money launderers.
          Worldwide trend should also be followed. Whenever interest rates decrease property prices increase. And when interest rate increase property prices decrease.
          Currently interest rates are increasing in Pakistan. So property is decreasing.
          Pakistani property market boomed in last years of PMLN only because interest rate was historic low at 5.75%.
          People are getting more profits from banks.
          But property prices are sliding day by day.
          Why investors buy property to loose money.
          This is the serious question.

          • Fraz

            on   said 

            Anwaar Sb

            Amnesty scheme is not linked with property prices.

            Lifting the ban on nonfilers to purchase property is the main matter of concern.

            Yes, property prices depend on interest rates worldwide, but it is only true when banks are major owners of the property as they give 70 to 80 percent loan to people who want to buy property.

            In Pakistan, there is no concept of a mortgage, therefore, interest rates do not affect property prices.

            In the USA, Europe, and Canada, governments control property prices by increasing interest rates. When interest rate increase, monthly mortgage payment also increase. Therefore people show less interest in buying properties. In this scenario, property prices decrease due to less demand.

            All things considered, I anticipate a significant increase in property prices after the budget 2019.

          • Fraz
            First property boom in Pakistan 2003-2006 = Interest rate record low 7.5%
            First property crash in Pakistan 2006 = Interest rate increased to 9%
            Second property boom in Pakistan 2013-2016 = Interest rate record low at 5.75%
            Second property crash 2019 in Pakistan = Interest rate increased to 10.75%
            Businesses hit hard when interest rates are high. This stops the construction activities because loan are not affordable.
            How automobile industry is performing as non filers can buy cars now. Not a significant change.

      • M ANWAR

        on   said 

        Sir, there is no 35% cheaper or down in property.
        Can u support ur reply with facts n figure n data along with year wise. I hope u will reply with supporting data.

  4. Zahid Ali

    on   said 

    I met many estate agent in Karachi. They all are surviving on rental commission. They told me that they have dozens of properties on sale, but very few buyers in the market. Although sellers are optimistic and not willing to reduce their demand.

    • Muhammad azeem uddin

      on   said 

      Dear zahid sb,
      You are right. Actually during last 3 years property prices soaring abnormally and seller still in mood as well estate agent that situation will become same.. But they did not know in the world as season changes the business changes.

      The property market boom by only Black money and it looks pakistan just on way BLACK LIST by FATF as today shah mwhmood sb FM told it.
      GDP shrink 5.8 to 2.8 it means 3 Million people already jobless.

      As well high inflation the saving will hit high.. PSDP has shrink 1050 billion Rs to 410 billion and still not release because their is no money.

      Budget deficit about 425b it means their is further tax in coming budget I mean increase is sales tax.

      I the whole scinerio any one who has LOOKING OPEN EYES can easily understand where the country is going and WHAT WILL BE FUTURE real estate price?

      It is easily understood average salary RS 30000 and even youth have no job and 5 Marla house price is RS 1.25 crore.. is it GOOD JOKE and nothing else. What a country we have develop after releases BRITISH !!

  5. ALI

    on   said 

    Karachi property market, prices are either stagnant or very little increased in the past few months. I don’t see any drop in asking price, for eg. North Nazimabad block H, L or N, 240 yards single home around 3 and double 4 to 4.5 crores. Same condition for other B class areas in karachi. Property dealers and land grabbers are big mafias in Karachi and they never let property prices to go down.

  6. Ahmad

    on   said 

    As they say every cloud has a silver lining. It is a big opportunity for those people who really need house for their accomodation and probably for those as well who want to invest for future. Just like best time to invest in stock market when it is down not the other way around.


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