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Pakistan property market now and in the future

Pakistan property market now and in the future

Pakistan real estate property sector is stagnant since the introduction of new property taxes in budget 2016-17. The government imposed heavy taxes on sale and purchase of properties. Even the introduction of property tax amnesty scheme has failed to uplift the stagnant property market. In the latest budget 2017-18, the government has once again increased the property taxes and FBR is soon going to increase the property valuation rates by 30%.

Higher taxes have both positive and negative effects on real estate sector. On positive side, higher taxes result in low property transactions. Low transactions mean low property prices, which are good for the genuine home buyers. On negative side, low transactions mean low sale & purchase of properties. Low property transactions decrease the income of real estate agents. Let’s discuss in detail the situation of Pakistan property market now and in the future.

Current situation of Pakistan property market

Currently Pakistan real estate sector is stagnant. There are three major reasons of this stagnation. Firstly, government has increased the property taxes (Capital Gain Tax on sale of property has been increased to 20% from 10% and holding time is 3 years but no discount on sale of property within 1, 2 or 3 years) and FBR is also going to increase the property valuation rates by 30%. Due to higher taxes, property transactions have decreased. Secondly, political turmoil in Pakistan has negative effect on real estate sector. Due to political turmoil, uncertainty increases and investors never invest in uncertain circumstances. This has also reduced the amount of capital investment in real estate sector. Thirdly, Pakistan is fast loosing foreign remittances due to economic meltdown and political instability in Middle Eastern Countries. Economies of Middle Eastern countries are melting down due to low oil price. Low foreign remittances mean less investment in real estate sector which will affect the overall volume of property transactions.

Future of Pakistan real estate sector

In order to know the future real estate trends in Pakistan, we should first know the property buyers and real estate investors in Pakistan. Who are the buyers of expensive properties, worth 2 crore or above? The simple answer is; businessmen, Pakistani expatriates and people with black money. Firstly, businesses are down due to bad economic condition in Pakistan. Secondly, Pakistani expatriates are losing buying power due to economic meltdown in Middle Ester countries. Thirdly, massive crack down by SC on black money is underway.

So what will happen when there are no buyers of luxury or expensive properties? Simple answer is that property prices will either fall sharply or will remain stagnant for 4-5 years. Pakistan has already witnessed the combination of both scenarios from 2005-2010, when property prices first crashed and then remained stagnant for years. So in short, we will see property price fall in future. The only question is the hard crash or soft crash. This property crash is what most Pakistanis want to happen, as it will bring down the property prices to much affordable level.

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Pakistan real estate Tax 2017-18

(15) Comments

  1. ahmad

    on   said 

    i really don’t think that property will fall by 50% or even by 30%,..still house prices are too much here in lahore you can’t get 5 marla house less then in 8 million..,i have only seen 5 lahks decrease in 5 marla plot and 10, in 10 marla plots,
    poeple here in pak don’t find any other secure option rather then investing in property,holding power of people is really too strong only those are selling who really need to take there investment out.
    sir Author do when you think its time to invest in property and where to invest in lahore with budget on 5 million thanks

    Reply
    • RIZWAN
      Yes when businesses are slow, employment is low,when people have less money they spend less on real estate. This will ultimately reduce the real estate transactions. Low transactions means low property price.
      This is not just Pakistan, all over the world property prices are falling due to low investment. Shockingly world total debt is 300% of total GDP. How people will invest when there is such a massive debt?
      Another thing is, imagine what will happen to property prices in Pakistan if expected crack down on black money happens. many realtors say that market has entered in bubble phase like 2005 and can crash soon. But due to crack down on black money prices will fall more than 2005 in percentage and will take longer to recover. In 2005, property prices were low by 50-60%.

      For you and people who want affordable flats in Karachi on Installments, just check the new project;
      ASF ARABIAN VISTA
      http://ghar47.com/property/asf-arabian-vista-karachi-apartments-payment-plan-booking-details/

      Rizwan, prices are highly affordable able and it has 4.5 years payment plan.

      Reply
  2. Ali Asghar

    on   said 

    Dear Author,
    Prices are stagnant since last year but prices are more or less holding steady. I have 5 to 6 million to invest but i am afraid that the crash can happen any moment and i will loose a lot on my investment. On the other hand I am also worried that if i dont invest now i am already lossing on my cash due to annual inflation, more what if prices actually go up.

    My wife is trying to convince me that we should invest now no matter what and if she turns out to be correct you know what can happen to a husband on the wrong end of deccission making in a family. 😁

    Any suggestions

    Regards
    Ali

    Reply
    • Ali Asghar
      Things are confusing and not good for real estate sector. If you watch TV, SC is doing ruthless accountability. Price have started falling and face will be fast in couple of months. Within three months you wills see massive price fall in Pakistan. You will definitely get cheap properties soon. Just little more wait. This is the game of nerves. Winner will be the one who has nerves of steel. So, its better to wait.

      Reply
  3. Ahmed

    on   said 

    I have been doing job in reputed company for 7 years, with 50 thousand salary now which is an average salary. An average rent of 2 bed DD in karachi is 25,000 which is 50% of my salary. How will I feed my 2 kids? If I want a loan, I will not get more than 30 to 35 lacs. How the hell will I buy property in city?. Look at the rise in rent, how will an average person afford to live? What will be the end result of this bubble? And how much will it take for a complete property bubble crash.

    Investors should understand the analytics that this market has no space, genuine buyers are no longer capable to afford 80 90 lac appartment, which will not let their money liquidate. Election is near, stock market is down, business is low, remittances are low, global economic fall is also been observed. How come property market is reliable more? Near the election, all the investors will try to liquidate the money, increase in interest rate will attract investors in different opportunities, that will cause increase in supply with no purchasing power in market and later on crashing it. What I analyze it is that an average 75 lac appartment will come down to 35 to 40 lac in karachi within a year.

    Reply
    • Ahmed
      Just have comparison of UK & PAKISTAN as both countries have same population density 250-270 people living per square kilometer
      UK is one of the most expensive cities to buy a home worldwide. Second only to Monaco.
      Minimum wage per year in UK = 21 LAC
      Minimum wage in Pakistan = 1.8 LAC
      Ratio is = 11.5
      Average house price in London = 6 crore
      So according to minimum wage ratio average house price in Karachi should be 50 LAC
      What we can buy with 50 LAC in Karachi, Lahore and Islamabad is just 80 Yards or 3 Marla house.
      But what is the average size house in Karachi, Lahore ad Islamabad. Its 250 sq yards or 10 Marla with average price of 1.5 crore

      According to all calculations, house price in Pakistan is 65% more than it should be.
      What I see is the hard price crash in Pakistan.
      You are 100% right after price crash 90 Lac house value will be between 30-40 LAC

      One of the guy just shared his income and expenses and he told me that he can never buy home in Pakistan. He is earning 1 LAC per month. He is paying 30,000 for rent. 25,000 for kitchen and 20,000 is the expense of two school going kids. Car maintenance 10-15%. Visits to home town 10000. Net saving per month big 0.

      If even good salary people cannot buy the houses in Pakistan, then who are buying.
      JUST THE PEOPLE WITH BLACK MONEY.
      500 SQ YARDS house price in DHA Karachi is 7.5-10 Crore
      Can some one with white money afford it? Definitely not.

      What I see is that Pakistan property is in bubble phase and will bust soon. It will take 6-12 months for this process but we are on the track. We will see 65% property price crash as happened in 2005. SC has already started the corruption cases where money is used for land and land scams. Low prices will be great relief for honest tax payers. CRASH CRASH CRASH
      Its coming, Just the matter of time.

      I TOLD MY RELATIVE IN UK ABOUT HOUSE PRICES IN PAKISTAN. His simple answer was that London seems cheaper than Pakistan!
      NEW YORK & LONDON are called as WORLD CITIES. According to Londoner, LONDON is cheaper than Karachi, Lahore and Islamabad.
      There is something wrong in Pakistan. Hope it will fix soon.

      Reply
    • rizwan

      on   said 

      DEAR AHMED BHAI
      SAME IS THE CASE WITH ME AS HAVE BEEN SARCHING TO BUY HOUSE IN KHI SINCE 1 YEAR BUT NOTHING IS IN MY RANGE AND RENT IS SOOOOO MUCH THAT I AM GOING IN LOSS EVERY MONTH AND CANNOT EVEN AFFORD SOO HIGH RENTS NOW….IT IS VERY TROUBLING SITUATION AS WE GENUINE HOME BUYERS CANNOT BUY ANYTHING IN KHI DUE TO PROPERTY MAFIA AND SOO HIGH PRICES….WHILE GOVT HAS DONE NOTHING TO STOP THIS…THERE SHOULD BE A LAW THAT NO ONE CAN BUY MORE DEN 1 HOME OR PLOT SO THAT ARTIFICIAL DEMAND CAN BE REDUCED OR BLACK MONEY SHOULD BE CHANNELED OUT OF PROPERTY SECTOR

      Reply
    • Adnan Shaikh

      on   said 

      Bhai apne interior sindh ke bhaiyon ko nahi dekha apne shayad jo yahan Karachi mein shift hue han 5 sal se or ho rahe han roz ke hisab se or ye hi basic waja ha Karachi ki property rocket high hone ki because they are mostly government servent and landlord and have to much black money through corruption so bhol jaoo yahan sindh mein corruption ke kilaf kuch ho sakhta ha or prices will sharply rise near futurebib Karachi…

      Reply
  4. muhamamd azeem uddin

    on   said 

    sir
    nicely analysis and really using the words SOFT CRASH OR HARD CRASH !!!

    sir just you have read in newspaper that USD 3B have been over shown in the account of foreign reserve as well as USD 11.2B will be return in the shape of loan installment and mark up in the year 2017-2018.
    so every pakistani can imagine and analysis what is the strength of economy.

    export is downward from 25B to 20 B and remettence from 20B to 18B and it will come down further as you have write the reason oil come down and middle east countries position is BAD.

    now the normal price in major cities in pakistan home price 500 Sq. yard is 5 crore or 50 Million rupees. i think in this price a person can buy home in UK.

    now who can buy house in this price and how many people ?

    having black money ,, if crack down should start then they will run away ,,, now businessman ,, in pakistan industry owner are being transfer their business as a traders,, foreign remittance is going down ?? Then WHO
    ???

    Reply
    • Muhammad Azeem Uddin
      Just for comparison which shocked me,
      Average house price in London = 7.5 crore
      Average house price in New York = 7 crore
      Average house price in Karachi, Lahore & Islamabad is 2 Crore
      Average salary in New York and London is 60 LAC per month
      Average salary in top Pakistani cities in 6 LAC
      How our houses can be so expensive?
      Even Dubai property looks affordable as compared to Pakistan

      High property prices in Pakistan are just due to black money
      When business is down, foreign remittances are low, how can be prices so high?
      Crack down on black money will crash the property prices.
      In 2005, 500 sq yards plot price in DHA Phase 5 Lahore was for 1.5 core but after crash it was down to 50 LAC.
      We should be ready for similar crash.
      Hard crash will be the sharp price fall within 4-6 months
      Soft crash will be price stagnation for 5-10 years as in Dubai. Dubai property price is still 30% down after 10 years; since 2008 crash.

      Reply
    • Rizwan
      Definitely property will fall, In shaa ALLAH. Thing are getting very ugly in Pakistan. Due to crackdown on Black Money, just imagine whats happening in stock market. Pakistan stock market is crashing fast. Its due to the panic of people to transfer money to foreign safe heavens. Investors are in panic. Launch of new projects are record low. Last year in Ramadan 13 new projects were introduced but this Ramadan just 1.
      Many real estate say they have no deal in months and are forced to sell cars bought in heydays.
      Many estate agencies have closed their offices countrywide.
      Now in future pretty prices will be dictated by the purchasing power of genuine home buyers rather than the people with black money.
      Last year is even not good for property sector. I see property market fall / stagnation for many years.
      Just imagine, Dubai property market is still 30% down than 2008 peak. Why not in Pakistan?
      Low property prices will benefit genuine buyers and estate agents as transactions will rise. Property transactions are 80% low than April 2016 level.

      Reply

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