Pakistan real estate booms and busts
Since the dawn of 21st century, real estate sector has played a prominent role in our national economy. Pakistan has witnessed two property booms and busts since 2000. Let’s discuss the reasons behind these two property booms and busts.
First property boom in Pakistan 2003-2005
Reasons of property price rise 2003-2005
1-Interest rate was record low; 7.5% in history of Pakistan. People just withdrew money from banks and invested in property sector and prices boomed.
2-Due to security issues in USA after 9/11, Pakistanis returned back with their capital. They invested money in property sector and prices boomed.
3-Pakistan got massive NATO AID in Afghan War. With that money government started many subsidy schemes and infrastructure projects. Nearly every business flourished and people got jobs. Ultimately lot of this newly created money ended in real estate sector and property prices boomed.
Reasons of property price fall 2005
1-Better security condition in USA and people moved back with their capital
2- Bank interest rate was raised to 9% due to which investors sold out their properties and deposited capital in banks. Properties outnumbered the buyers and prices crashed.
Second property boom in Pakistan 20013-2016
Reasons of property price rise 2013-2016
1-Constant decrease in interest rate; now stands at 5.75% since May 2016
2-Rise is foreign remittances, record high $20 billion
3-Massive infrastructure developments
4-Stocks were low so people invested in property sector
5-Due to electricity shortage no other industry was performing as well as property sector with lucrative returns
Reasons of property price fall Since July 2016
1-Stocks are booming as Pakistan Stock Exchange is one of 5 best performing stocks in the world
2- High taxes on early sale of property after property tax amendments 2016
3-New property valuation rates by FBR
5-Blockage of black money from reality sector as FBR is asking the source of income.
Pakistan property market now after tax amnesty scheme
Pakistan property market is stagnant at the moment. Launch of new real estate projects is record low as compared to last year. Estate agents are reporting some rise in property transactions but we should know that property transactions are always high in December as most foreign Pakistanis visit home land and invest in properties. Couple of months will show the real direction of property market as the effects of amnesty scheme will be clear.