Why property prices rise and fall?
Rise and fall of property price is the talk of every town. Generally property price rise is hailed as good and property price fall is considered as bad. But on other hand, property rise makes it difficult for masses to buy homes and fall in prices make homes affordable for general public. The most important thing in this discussion is that what are the factors that increase or decrease the property prices?
Reasons of property price rise and fall
Property demand vs property stock
Property prices largely depend on fundamental called as demand and supply. When there are less properties and high demand, property prices rise. But on the other hand, when there are more properties and low demand, then property prices fall.
Investment in real estate sector
Volume of investment also impacts on the prices of property. Large investments increase the property demand and prices increase. Whereas low investments decrease the property demand and prices decrease. So, volume of investment in reality sector is good indication of rise and fall of property prices.
Interest rate
Interest rates have great impact on property prices. When interest rates are low, people get small profits on deposits and invest in property sector and vice versa. So when interest rates are low property prices rise and when interest rates are high property prices fall.
Current situation of Pakistan Property Market
Everyone knows that property prices are falling in Pakistan. Interest rates are low. But on the other hand investment in Pakistan reality sector is decreasing day by day. At the same time there are more properties in market than the buyers.
As government is offering amnesty scheme for reality sector, property prices will take nose dive. Firstly because there will be more properties in the market and secondly because of capital flight from reality sector. Capital flight from property sector is due to low profit margins as compared to past trends.