Is Property Bubble Burst Near?

Given the insane increase in prices with no increase in salaries, good bank interest rates on savings account, overseas Pakistanis refraining to invest in Pak, nominal rent that do not match property values and low purchasing power of buyers to buy properties worth in crore, will the real estate market crash in the near future? The high prices also do not justify the development standards with no security, poor economic conditions and political instability. And is supply more than demand. Thousand of ads are there to sell but is anyone really buying at such insane prices?

What I mean by crash is property prices reducing by almost 40-50%.

Simply impossible..

Reason:No other businesses for the people to invest due to economic conditions and because of this real estate became a full time industry now.

2-Developed places can remain stable but can never depreciate.

3-Demand in good societies is increasing and regular sale purchase is going on.

4-As profit on saving accounts are very less,people prefer to invest in real estate.

5-Priority and dream of everyone is to own a shelter for family so genuine demand is always there.

No property bubble burst. Urbanization putting a lot of pressure on cities coupled with increase in population.

Propert bubbles burst after continuous boom for a long time. But 2013's hike was reversed to some extent in 2014. It saved any chance of small bubble burst.

The majority of the real estate participants are overseas pakistanis and given the property prices in pakistan, within the same budget they can get a much better property overseas like in USA for instance where there is no political instability, good life, no load shedding, security of life so why would they want to invest in pakistan when they would get something better for the same price. Eventually rentals are better there as would get almost that of a bank rate approx. 7% but rentals in pakistan are not even 1% of their property values. This shows people cannot afford high rentals so leave alone buying millions of a single property. If prices keep rising then dont you think the market should crash. It may be true that population is also increasing so should demand but again demand would sustain if one is willing to spend crores for just mere 5-7 marla plot which most would not

Lol… The bubble is about to start forming… 2014 was a bad year for property and the high tide will come… Moreover, as B.R Malik said rightly that urbanisation is putting a lot of pressure on cities. Pakistan is the most urbanised country in the region if not Asia and it is increasingly getting urbanised at a very high rate. Rentals are around 4-5% on average of the property value and property value increases a lot in Pakistan as compared to US etc (Don’t forget the mortgage crisis in US which bursted the property bubble big time). Overseas Pakistanis invest heavily in Pakistan for various reasons, some of which are: good returns, investment in homeland to which they might eventually return, real estate and financial sector in Pakistan is relatively more safer than in the West (as it was not badly hit by the worldwide economic recession). As Saadi Sb has said rightly that real estate has become an industry in its own where people are earning by sale/purchase, development and construction, deal brokering, rentals etc.

Doosra yeh kay Pakistan ko kuch nahi honay wala… Bauhat dheet mulk hai… If the things that happened in this country had happened in any other country in the world, they would’ve surely been reduced to the ground by now. The bad times are over, good times are coming… What happened on 16/12 has awakened many people in this country and things are changing. Pray that the Pak-China Economic Corridor starts working, it will bring wonders to this country (I’m not a PMLN guy btw).

Arshad

Its not the case as of now ,and there are many trails to bring the story in positive side.

I agree with B.R Malik and SAADI.

Your perspective on the issue is ,watching it from a distance,reality is somewhat different,

Many overseas Pakistanis still opt and will remain to opt for investment in Pakistan real estate.And the simple reason for that is ECONOMIC CALCULATIONS, as many overseas cannot afford to buy property abroad.

JUST look at UAE the minimum price of houses is beyond the reach of 95 % Pakistanis,

HOUSE(VILLA) PRICE IN PRIME AREAS OF UAe,

SIZE 1700 SQ FT=1.7 MILLION DIRHAM(UAE)

SIZE 3000-5000 SQ FT=3.5 MILLION TO 5 MILLIONS dirhams,

NOW in cheap states of uae like AJMAN,

HOUSE 1500 SQ FT=1.5 MILLION DIRHAM

APARTMENT 1000 SQ FT=5 LACK DIRHAM,

NOW how many overseas can afford this? just 4-5 % , the overwhelming 95% have only one choice and that is Pakistan.

THE reason for slow market are multiple and we know many of them.Many (buyers)are just waiting for the right time in this haze.

IF you read the blog section of zameen.com , you can find many experts quite optimistic about increase in property prices in next few years,

EVEN some think of double prices in next 1-2 years , WHICH i never agree bcz of overoptimistic wishful dreams, any how property doesn't seems to come down in next few years , rather it will definitely increase from 30-50 % in next 3-5 years

Thanks guys for such detailed feedback

In 2014 real estate market crashed but i hope it will boom in the near future inshAllah.

Regards

Market never really crashed. 2014 would seem slow, sure, if you compare it with 2013 - there weren't a lot of buyers in the market, many people wanted to invest but never brought any money in the market, the political uncertainty and a myriad other things contributed to the slowness of the market but it never really crashed. There were corrections here and there but for the most part, the year remained a pretty stable one. Besides a bubble bursts only when it exists. :)

To reply to what DK's posted above, there is a lot of investment that's going into the Dubai market from Pakistan, AED4.5billion in H1 2014 to be exact but in a way, you're right, affordability is an issue for a lot of Pakistanis and unless we do something about the price control, we'd only be contributing to the housing shortfall that's already touching 1million mark.

A lot of taxes on plot transfer also made investors hesitant to invest and it kept fast property movements in check.

Probably it is in benefit of end users that investors inflate the prices. Downside is that investors keep the market moving. But taxes is real headache. Government is our partner in all property transactions.

I agreed. 2014 was a slow year but still people were investing in Property and trend of investing in property has been increasing due to current political and economical instability. Ups and down is part of any business, for instance at times, stock exchange goes very smooth and then market gets crashed badly. In property, even during bubble, there is possibility of less profit but there is negative chances of loss.

Prices can only remain high if people have the capacity to pay and the sustained higher prices in rapidly populating posh localities is evidence of the fact that a sizable minority has such purchasing power. So I don't see any crash over there.

However, due to the limited purchasing power of the vast majority, those areas around main urban centers having all facilities and reasonably good access with prices within affordable range might become the new investment hotspots. There are some decent societies coming up around Islamabad with all basic facilities with prices for 8-10 marla plots being under 2 million. Majority of middle class will likely head for these places.

It is true that 2014 remained a slow year as compared to 2013, but it still remained promising in terms of investment.

Slow activity can be partly attributed to political unrest and sit-ins.

Increase in property prices does not mean that the sector is going towards any bubble.

Rest ALLAH knows better.

regards,
Zain Nadeem

A true crash comes about mostly as a result of short-term speculative activity. That means that buyers do not acquire property for its intrinsic value but only to flip it and make a quick profit. While that is common in Pakistan, it is:

a) being discouraged now because of increased taxes

b) unlikely to affect the market too much because it is almost entirely cash-based and focused mostly on developed property as opposed to off-plan properties, as was the case in the Dubai crash of 2008-2009.

2014 was admittedly not a great year, but that is exactly what keeps Pakistan's property market from crashing. As soon as things start to balloon out of control - which is what happened in 2013 - the market reacts by undergoing correction, which is what we saw in 2014. On the face of it, 2014 seemed like a bad year, but in the long term it brought some much-needed stability.

2014 should be regarded as correction year.

All signs that next market rally is around the corner. Just a hunch, no real data to back up my prediction.

Market should rally. But the big problem is taxes. Taxes will keep movement in check. It’s really a lot of taxes for both buyer and seller too.

I am sorry for being pessimistic and kind of negative annalist or critic at most of the times,

BUT

I THINK MARKET WILL REMAIN THE SAME IN 2015,ONLY 5-10 % UPWARD MOVEMENT.

IT NEEDS SOME SPRING FLOWERS TO CHANGE THE TASTE OF OUR SOULS,and unfortunately there are no roses on offer by any of the big brands,

market is full of ambiguous uncertainties in Pindi/Islamabad except DHA which has its own world ,not affected by common market trends.

So do you think DK that DHA is a better option than Bahria, CDA, Multi etc ?

I think whenever any of the above mentioned start mega project in a given market, market has a lot of activity and market over all benefit. Am I right or wrong in the view?