Pakistan property slump continues
Real estate activates in Pakistan have stalled after the property tax amendments 2016. Transactions are 80-90% low from its peak in MAY/JUNE 2016. The new property tax amendments have badly affected the real estate sector. Even amnesty scheme is unable to give boost to stagnant reality sector. Pakistan reality sector has never witnessed such slump in its history.
Current situation of Pakistan real estate market
Unsold properties
1000s of houses, plots and commercial buildings are unsold since May 2016. Sellers have reduced the prices by 35-50%, but still no willing buyers. Small properties of worth up to 35 Lac have buyers but luxury properties are unable to attract buyers. One apartment project on Canal Road Lahore is 50% sold out at loss of 30-45%; Lahore has never seen such a state of the art apartment project in its history.
Launch of new real estate projects is record low
December is the month when lot of foreign Pakistanis visit homeland and invest in property sector. This is why lot of new real estate projects are launched by the developers. Unfortunately, launch of new projects in December 2016 is 90% lower than December 2015. Many uncompleted projects can be seen in major urban areas of Pakistan due to lack of interest from investors.
YES, some hype by realtors
Real estate agents are creating hype of health property market. Due to this hype, sellers are asking higher prices. According to some realtors there is 50-200% rise in property transactions in DHA Lahore. So according to the realtors if 5 properties were transferred per day in November, 20 daily transfers in December. But in May 2016, approximately 200 properties were transferred on daily basis. Picture is very dark indeed.
Reality check
After the discussion with realtors, buyers & sellers and price trend on which properties are sold out, Ghar47.com has the following information:
Prices in DHA Karachi = up to 35% down from peak in May 2016
Prices in DHA Lahore = up to 25% down from peak in May 2016
Prices in DHA Islamabad = up to 20% down from peak in May 2016
What is in store for Pakistan reality sector?
5000 Rupee bill cancellation
Senate has recently passed two bills. First one is to abolish 5000 notes from circulation and other one is Benami Bill. These all measures are to control illegal money circulation and to bring more people to tax net. If these laws are passed by parliament, we will see 50% decline in property prices, as happened in India.
Genuine buyers will dominate the market
Due to high taxes and fear of amnesty scheme trap, investors are not willing to invest in property sector at the moment. When investors are out, market is dominated by genuine buyers. Small size & cheap properties are hot cake and will dominate the market. But high end properties will have no buyers.
Long stagnation
On price trends we can see some rise as realtors are creating hype of sound property market. This hype will soon evaporate as people are moving back to foreign countries after holidays. Market activity in December was due to foreign Pakistanis. What we see in long run is price stagnation. This is not new in Pakistan as we saw long price stagnation from 2006-2010.