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PROPERTY PRICES CRASH IN PAKISTAN

PROPERTY PRICES CRASH IN PAKISTAN

PROPERTY PRICES CRASH IN PAKISTAN

Pakistan Property was generally considered as the best performing asset class due to quick gains. But things have changed now as real estate prices are in decline since 2016. The realty sector has lost its shine. This blog describes the main factors for Property Prices Crash in Pakistan.

REASONS OF PROPERTY PRICES CRASH IN PAKISTAN
Economic Downturn

70% economy of Pakistan was black economy, but now government has zero tolerance for black money. Everyone has to be filer and show the source of income. Therefore Pakistani economy is in decline due to the readjustment. At the same time Pakistani currency has devalued against the mighty dollar. Property price has direct relation with the economy. Economic decline results in decreasing the buying power so property prices also decrease and vice versa. Economic Downturn is the first major reason of the property prices crash in Pakistan.

High Interest Rate

Interest rate has direct impact on property prices. The rise in interest rate decreases the property prices whereas decline in interest rate increases the property prices. This is because when interest rate increases banks give more profits on fixed deposits. So people sell properties and deposit money in banks to earn high profits. But when interest rate decreases people start buying properties which increases the demand and prices also increase. Currently interest rate is record high in Pakistan so people are selling properties to earn high profits from banks. Therefore second reason of Property Prices Crash in Pakistan is the high interest rate.

New Property Tax Laws

Pakistan Budget 2019-20 was the game changer for real estate sector due to property tax amendments. Firstly people have to be filers to buy properties. Secondly seller has to hold constructed property for 4 years and plot for 8 years to avoid higher Capital Gain Tax. Thirdly FBR has increased property valuation rates up to 85% of the market value due to which volume of transactions has decreased. Investors have lost interest in realty sector due to new property tax amendments. The low investment has decreased the property prices. Therefore third major reason of property prices crash in Pakistan is new property tax laws.

Benami Assets Confiscation

Realty sector was the safe haven to park the black money in Pakistan. People hoarded ill-gotten wealth through Benami Assets. But government has introduced the laws to confiscate the Benami Assets. FBR has zero tolerance policy for black money and Benami Assets. As no one can hide the ill-gotten wealth so real estate investments have decreased. The low property demand has lead to property prices decline. Therefore fourth reason of property prices crash in Pakistan is the Benami Assets Confiscation.

CURRENT PROPERTY MARKET CONDITION IN PAKISTAN
Property Transactions

Real estate transactions are record low now. Once there were 180-200 daily file transfers only in DHA Lahore but now the number has decreased to just less than 10. This clearly shows that property market has not only crashed but investors have also lost interest.

Estate Agents

Property transactions are the bread and butter of estate agents. Many estate agents have closed their agencies as they are unable to pay the rents. Many agents who turned to be investors have sustained huge losses. Now many realtors are turning to other businesses.

Sellers

Sellers are in worst position especially those who bought properties at peak prices. They are desperate to sell properties even at loss. But it is hard to find serious buyer with white money in the market. Now properties are staying longer in the market before exchanging hands.

Buyers

Buyers are on the driving seat as there are more properties than the buyers. They know that property prices have crashed in Pakistan. Buyers are in no hurry and are waiting for the prices to bottom out. They are also in touch with the market and are offering very low bids to get big discounts.

PROPERTY PRICE TRENDS IN PAKISTAN

Property prices have already declined by 40% since 2016. But estate agents believe that biggest price crash has just started as they forecast another 40-50% property price crash. As per the current circumstances property prices in Pakistan will crash by 70% from peak of 2016. This is not a new trend as Dubai Property Prices have crashed by 75% since 2008. Property prices will bottom out within a year.

FUTURE OF PAKISTAN REALTY SECTOR

Pakistan real estate sector has changed forever. Firstly it is impossible to park black money in realty sector so speculation will end. Secondly property will be only for living or commercial uses rather than the day trading as was the routine in old days. Thirdly abnormal property prices will be history as future price gains will be gradual. Fourthly middle class people will be able to own homes in Pakistan.

RECOMMENDED:
Impact of Benami Assets Confiscation on Real Estate Market

45 Comments

  1. Muhammad Nazeer

    on said  

    Dear Anwar ul Islam , Kindly let me know best time to buy an affordable plot or house in Islamabad CDA sector for family living and approximate cost it looks like prices are going down & real crash yet to come .
    We have spent many years abroad but now it is time to repatriate our home land. Thanks

    Reply
  2. Riaz sultan

    on said  

    Anwaar ul Islam Comments on Pakistan real estate market is very realistic. I have noticed many ads which are over 6 months old and that properties are still available in the market waiting for genuine buyers. whereas price graph is on decline mode rather it has a free fall tendency.
    Naya Pakistan housing schemes to be commenced in 2020 that will impact prices to reduce further.

    Reply
  3. Muhammad Nazeer

    on said  

    Dear all reader, Please wait for PTI government promises on affordable housing schemes in Pakistan. I am an overseas Pakistani waiting for last 1-1/2 year when they will develop CDA sectors for expat. There is no issue of white money for them can pay in hard currency it also boost Country economy.
    Regards

    Reply
  4. Anwaar Ul Islam

    People should understand that real estate market can no longer stand on black money any more.

    Massive fall in property prices is expected after the efflux of black money from the real estate and the poor economic indicators

    Reply
  5. Mr. A war Ul Islam,

    Thanks. I think most of the people here do not understand or believe the economic indicators and the other factors like FATF global demands to control the influx of black money in the real estate market .

    Reply
  6. Dear Raja sahib,

    If u think that the prices u have mentioned are genuine and there is no risk of further fall, u can go ahead. In my opinion, there is a great risk to purchase now at this price.

    Reply
    • Jashed
      As per IMF inflation will be high and economy will not revive till 2023.
      Amnesty International, IMF, World Bank have pointed that biggest issue of India, Pakistan and Bangladesh is the black economy.
      New laws are on the way.
      All indicators point towards price fall.
      Property prices will bottom out by end of 2020 or 2021. Prices will rise only by 2023. Wait is better.

      Reply
  7. I am searching a house or plot in G-11, Islamabad. 5 Marala old house costs Rs. 19 Million. Kindly advise, as Sectors did not seem any correction in price rather than took increase.

    Reply
  8. Dear Sir
    I can’t understand everyone is saying that prices have gone down but I am looking for a house in DHA Karachi and agents are saying nothing less than 9 c or plots for 5 c such unrealistic prices but they are saying that these are the rates and ppl are buying at these rates .
    Is this true ??? What should we quote for a house or plot in DHA khi phase 5 ,6 7 or 8
    When will the prices be realistic ?

    Reply
  9. Discount rate (interest rate) has been decreased by SBP today by 20-30%. I am guessing real estate market has already been bottomed out. After this stage interest rate will gradually decrease rather increase so real estate price start going up. What’s your opinion Anwar sahib.

    Reply
  10. Looking at all the comments, it looks like I can find a good deal for a 500 sqy plot in DHA Karachi. Can anyone help me link with a reliable agent who can help me? I am residing in UAE. Thanks for your help.

    Reply
  11. Dear sir,
    Real estate regulatory authority, fatf put clause and govt have implemented.
    Kindly explain what impact on real estate prices.

    Reply
  12. Shamila

    on said  

    Dear sir,
    I have read in the international news that FATF APG advised Pakistan to make REAL ESTATE REGULARITY AUTHORITY,
    kindly write an article in details how could not possibly to PARK BLACK MONEY in property sector
    At india this body already implemented as well ar DUBAI it is not possible to buy property from back money,

    Reply
  13. Muhammad azeem uddin

    on said  

    Dear Anwar sb,
    Thank you very much for your very prompt reply and doing hard efforts for my question answer.
    Actually I have read a book and author have advising to check real estate bubble to follow the rules which I ask question from you.
    According to your reply I am quite sure the bubble just near to burst.
    Anwar SB, I meet many of estate agent and one voice is common that market will go up very soon, But they did not say WHAT CAUSES ?
    you are only 1 person who says TRUTH about real estate.
    Thank you once again my friend.

    Reply
  14. I live in Canada and am nearing retirement age and soon wish to spend 4-5 months in Islamabad. We want to buy a 2-3 bedroom condominium there. Can you recommend a reputable builder and a prime central location. Based on your blog, it looks like I should wait until latter part of 2020 to purchase as prices would have bottomed out by then. Kindly confirm this.

    Reply
  15. Muhammad azeem uddin

    on said  

    Dear Anwaar sb,
    If you have know the data for last 6 months , then kindly share

    that nowadays in one month how many houses and plots are sold out and how many are available for SALE.
    I mean in month of , june ? July ? August? September? October? November? How many plot and houses sold DHA LAHORE

    And how many available for sale ?

    Reply
    • Muhammad Azeem Uddin
      I discussed in detail with the estate agents of DHA LAHORE. According to them sale purchase of plots and houses has nearly stopped. An agent working in DHA LAHORE since 1999 said he has never seen such a bad condition of realty sector. According to him the crash of 2005/06 was like a spring in front of present property price crash and back in 2005/06 transactions were normal.
      Dealers say that even after reducing the asking prices they are unable to find the buyers.
      40% Estate Agencies have closed their businesses since 2016 and 10% more will leave in couple of months.

      Reply
  16. Excellent and honest analysis of real state in Pakistan.
    Please write a blog on bahria town peshawar which is launching in January 2020.

    Reply
    • Amjad
      Bahria Town Peshawar is all speculation. Although there is demand of good housing scheme in Peshawar. But due to high speculation and low income for dealers all have bet on Bahria Town Peshawar.
      Therefore prices will rise initially but with the time we will see price fall when end users will come forward.
      Bahria Town Peshawar will be good only for living. Whereas investors will benefit if they sell files within a month.

      Reply
  17. Nazish Fatima

    on said  

    Dear sir
    I am from Karachi and I am getcin touch with few real estate agents. I am looking good price to buy home as well plot. But I did not able to get in my range.
    However I am surprised to know that if any one is buying 400 sqyard plot then he need at least 2.5 crore.
    I would like to know how people will justify the SOURCE OF INCOME. Because very few have from white money and bank is asking a lot of questions when anyone wants to make pay order.
    I further ask from you that how people are making way to do payment and still I am seeing plot pieces not coming down

    Reply
    • Nazish Fatima
      Dealers are just asking the unrealistic prices.
      Otherwise market has crashed.
      In DHA files of 30 LAC are selling at 20 LAC.
      This is because of the SOURCE OF INCOME. Very few people have white money so market has crashed.

      Reply
  18. Dear Mr. Anwar,
    The way the property prices are going down in Pakistan, I think the market value will be lower than the FBR value at some point. If this would be the case which is highly likely then FBR will also reduce the prices ?

    Reply
  19. Jahanzeb

    on said  

    Dear Anwar bro,
    I m following ur comments from last couple of years and u were among very few people who said market will continue to decline untill prices bottom out. To me u did an absolute analysis for high prices property.
    My question, where do u see when this property market will stablize and which areas are still save places to invest in property. Do u recommend investment in real estate?

    Regards
    Jahanzeb

    Reply
    • Jahanzeb
      Property market has totally collapsed in Pakistan.
      Even small or cheap properties have seen correction.
      But still Plots up to 40 LAC and houses under 1 CRORE will see less price correction.
      Now only those people should invest who have holding power like 4/5 years.
      Property prices of 2016 will revive by 2025/2026.

      Reply
    • Jased
      The most affordable phase of DHA Lahore is Phase 7.
      1 Kanal / 500 SQ YARDS Plots sold for 152 LAC in 2016 are now at 115 LAC.
      File prices in Phase 9 DHA Lahore deceasing day by day.
      No buyer in the market.

      Reply
  20. Anwar,
    LDA City, Lahore balloting is expected on 30-Nov how you see the impact of current situation on balloted plots. Will there be any increase in prices as people are expecting?
    Thanks

    Reply
  21. M ANWAR

    on said  

    dear sir, in actual, prices are high in market as u see in isb.
    can u support ur updates along with ur some data area wise.
    hope u will reply.

    Reply
    • M ANWAR
      DHA Lahore Commercial Broadway Phase 8 just opposite to Lahore Airport.
      8 Marla / 200 SQ YARDS Commercial Plot was selling at 12 Crore in 2016.
      Now same plot is available for 6 Crore and no buyer.
      Market has already crashed especially the high end luxury real estate market.

      Reply
  22. Muhammad azeem uddin

    on said  

    Dear Anwar sb,
    Kindly share us what is the clauses from FATF , regarding real estate sector ?
    Your analysis is right but regarding price their nothing lowest.
    Regarding real estate agents: they are very optimistic market will drive again like 2016, and lat three months I saw market increase more 20% , as I think few strange hands pushing it,
    But mostly not think it is business and like waves, up and down natural.
    If we say about economy it is lowest in the asian region even war involved country Afghanistan.
    Would pakistan economy will drive growth from 2.4% , I am sorry to say that during last 16 years we are busy to playing PLOT , plot.
    And our competitors are busy to develop Industries.
    Now they have lot of product to export and we are busy to sit tea shop and waiting increase plot price.
    Would plot price increase again and when : yes plot price will again increase double or tripled if their is arrange any LOAN. And it would more than 25 Billion.
    But after that what will happen : the RICH WILL MORE RICHER AND POOR WILL BE MORE POORER.
    Because we can not pay back the loan

    Reply
    • Muhammad Azeem Uddin
      Property prices have crashed in Karachi.
      DHA Karachi is the real victim.
      500 SQ YARDS Plot price in DHA PHASE 7/8 was 5 Crore.
      No buyer even at 2 crore.
      Is it not the market crash?

      Reply
  23. Zahid Ali

    on said  

    Seller who are still demanding equivalent to 2016 peak prices, they have to wait for atleast four or more years to get their demand. But on the other hand, it is very difficult for buyer to buy a property equivalent to 50% to 60% of 2016 peak price in all areas of Pakistan. So, it is battle of nerves.
    Now the question is, when the price will be bottomed out?
    How long that bottomed out price will stay?
    When the bottomed out price will start increasing again gradually?
    The above three question are very important for those persons who want to buy their first and last property of the life.
    Everybody should get in touch with blogs/experts to have the right idea of time line.
    One more thing is that, in US and Canada, there are lot of rumours that the great recession is knocking the door. Governments uptill now are able to defer the recession. But the later the recession the greater it would be. That recession will also have an impact of property prices in north America but will it also have an impact in property price of Pakistan. This is also a question.

    Reply
    • Zahid Ali
      Pakistan, India, UAE and Europe is almost into recession.
      US Economy is even not performing good.
      Pakistan property prices crashed in last global recession of 2008.
      Bottoming out of property prices is a long process that might take few months to many years.
      But one thing is clear that year 2020 will be the worst year for Pakistan Real estate Sector.

      Reply
  24. Saba Hussain

    on said  

    Thanks for updating about property market situation in Pakistan.
    Pakistan Property Prices Crash in 2019.
    I think 2020 will be even worst for real estate sector.

    Reply

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