YC, as far as I understand.
The ultimate scenario boils down to the fact if one is willing to buy at escalated price or no at land is a local commodity. Importantly, buyer/purchaser may have other lucrative options like saving in an appreciating currency or bulking up imported products.
Ideally, yes a physical asset (Real Estate entity) in a state maintaining equilibrium with physical commodities like gold/resources or intl. currency. However, that is super idealistic and in a market like Pakistan that can rarely work. For real estate, its more like value addition on top of existing raw product (cost of land + development charges). Here its more like Stock Market scenario where non-existing real estate (in Files) can fluctuate on daily basis based on news/rumors, a strategy that BT mastered years ago and now backfiring (Phase 8 extension at standstill almost after 6+ yrs and BT KHI, some part of land that was sold in Files had to be surrendered to state after SC).
Above all, this is Pakistan Pepsi outperforms Coke and then PM in queue publicly urging Nation to 'Do Hundi and avoid Banking Channels'...
1. USD to Product/Service/Commodity Parity
becomes relevant in an international transaction scenario, i.e., to keep up the value on par with whatever agreed upon exchange entity (USD/EUR/Barter etc. paid for asset purchased).
2. Local Assets/Products/Services are Driven by Supply/Demand
rather the Forex. However, more the value addition (with imported stuff), the price will automatically escalate regardless of the fact, if there is demand at such price or no. Plot price may remain stable, however, house constructed before devaluation will benefit due to increased market prices as a factor of devaluation.
3. Foreign Investment
One earning in lets say USD (or any pegged currency), will have a Black Friday Offer situation, if they like to purchase local asset in a state with devalued currency (more stuff for less bucks).
4. Local Investment
One earning in local currency will have somehow Pre-Christmas buying scenario with least benefit, if there are any due to supply-demand.
To conclude: I believe, land value only to appreciate if demand exceeds supply for whatever reasons. Plots and Constructed Units have different dynamic based on currency devaluation.
I believe in short, taking a more common-man approach, if some currency value is increasing more then real estate, best bet is to save and when currency value stabilize invest then. In Pakistan, unfortunately not many attractive investment options, real estate becomes one of the hot favorites.
35 days ago