Prices of luxury homes are crashing
Luxury high-end homes in Pakistan
High-end or luxury homes in Pakistan are of two types; expensive homes due to large sizes and expensive homes due to very hot locations. Every major housing scheme in Pakistan has 1 Kanal and even bigger homes. Prices of such a large size homes are sky high. Even apartments & flats located in hot areas are very expensive. Property prices in Pakistan have increased by 10 folds from 2003 to 2015. Now prices are so high that people cannot afford to buy even 5 Marla house, with average price PKR 10 million. The high property prices have a negative impact on luxury homes market. 50% houses in DHA and other posh areas are empty due to high prices and abnormal rents. Strange but true, 5 Marla house price in DHA Phase 5 Lahore is 15 million PAK Rupees, whereas with same amount one can buy 10 Marla house in Bahria Town Lahore. Empty residential plots can be seen in every phase of DHA Lahore. Even in other housing schemes, small houses are occupied but large houses and residential plots are empty. Due to high prices, people are just downsizing homes and are also shifting to the areas where prices are affordable. Affordable price is the major reason that suburbs of major cities are fast inhabited in Pakistan.
Prices of luxury homes are crashing due to;
Changing lifestyle
People in Pakistan were used to live in joint family system. Large families need large homes. This is why homes built in the past were larger in size. For example average house size in Model Town Lahore was 1 acre. But now trends are fast changing. People now prefer to live separately and joint family living is no widely hailed in Pakistan. Single family can accommodate in a small home and people are just selling large properties to live separately. People are also demolishing large houses to build small housing units. Changing lifestyle in Pakistan has negative impact on large size luxury homes and prices are crashing.
High maintenance cost
Large size & expensive homes can be found in every city of Pakistan. These houses were affordable in the past due to cheap labor and low maintenance costs. Now maintenance cost is increasing in Pakistan due to high inflation & wages. Several servants are required to maintain 1 Kanal or large size houses, which is not affordable now. Similarly large houses have high cooling & heating costs. Therefore due to high maintenance costs, people are abandoning large houses and prices are crashing nationwide.
Unaffordable rents
Rents in Karachi, Lahore and Islamabad are sky high due to limited land area & housing stock and huge influx of people from nearby regions. 5 Marla house rent in DHA Lahore, Lahore Cantonment, Gulberg Lahore, DHA Karachi, Clifton Karachi, E 11 Islamabad and F 11 Islamabad is more than 50,000 PAK Rupees. Whereas in other less posh areas, rent of 1 Kanal house is PKR 50,000. Abnormal rents are another reason of luxury property price crash in Pakistan.
High property tax
Pakistan is moving in the right direction to impose fair property tax. The government of Pakistan is making laws to impose luxury tax on expensive & larger properties. In Pakistan cheaper & small houses are exempted from property tax but property taxes are high for luxury properties & homes in Pakistan. Due to increasing tax rates, luxury properties are becoming more of a burden. High property tax is another reason of luxury home price crash in Pakistan.
Low resale value
High-end home is a luxury but not a necessity. Luxury homes are designed according to owner’s taste and requirements. Different people have different preferences about home designs & interiors. Therefore when someone buys a luxury home, the first consideration is the design alterations and renovation costs. Similarly, very few people in Pakistan can afford to buy luxury homes. Due to small number of luxury home buyers, resale value of high-end expensive homes in very low in Pakistan. Therefore, due to extremely low resale value, prices of luxury homes are crashing in Pakistan.
Luxury or high-end homes are considered as the dwellings of the ghosts
While doing masters in London, I visited Berlin, Istanbul, Madrid, Moscow, Paris and Rome. All these cities have many streets where average home price is 1 million dollars or more. But at the same time many of these streets are called as ghost streets due to abandoned houses. Houses are empty due to sky high prices and unaffordable rents. Prices are crashing in these towns as it’s extremely hard to find buyers for those homes. For example Spanish property crash is so severe that there are 3.4 million empty homes. Spanish government is so desperate to find buyers for these houses that she is offering nationality if someone buys a home of worth $50,000 (Nationality for just PKR 5 million, whereas it was PKR 100 million in 2005). Spanish property crash is due to large sizes of luxury villas with sky high prices & maintenance costs. Same is true with DHA where more than 50% dwellings are empty and we can see many empty plots in even developed phases; a reality check?
My vote is for small and cheap properties
I am in favor of small size housing units in Pakistan due to higher affordability and better land usage. Luxury apartments & homes have no future in Pakistan. Mega Malls & Skyscrapers in Karachi, Lahore and Islamabad have luxury apartments, which are mostly empty due to highly unaffordable rates. Therefore developers should consider the buying power of general public before developing residential projects. Many people in Pakistan are of the view that real estate market in stagnant which is not true. People are just abandoning luxury homes, but on the other hand sale of small homes in Pakistan is increasing day by day. This is the natural phenomenon, as market is correcting itself according to the affordability & changing lifestyle.