Oil prices are reaching lowest levels in recent years. Strong rumors have started for a crash of american stocks. Chinese economy has slowed down which is partially responsible for oil price crash.
What does all this mean for pak property near future?
I think it would not affect real estate of Pakistan, indeed it would be good for Pakistan as Pakistan does not rely on oil for its export income rather these are imports and reduced prices would recall cheap imports. As the oil demand is low and supply is large so Pakistan can get this for cheap and it would also result in lower prices of goods that directly relate to oil.
In-fact great opportunity for development for Pakistan if our leaders have some vision.
Lower prices will save valuable reserves, these could have to be used for maga project completion,
overall economic activity will flourish now,
lowering in the cost of livings, result in more savings, a big chunk of it will be invested in real estate as well.
I also agree with the above analysis.
Others also share your thoughts.....
In June 2014, oil price was $115 a barrel and now the very latest price is less than $50. Its very interesting to see the turns of events as some are fearing a recession while others are saying that the situation will be more or less stable, with zero growth. However, its true that the falling oil prices are going to hit the oil exporting countries very hard with their revenues falling so fast!
On the other hand, on this part of the world, people are actually going to pay less for fuel and this will drive down prices of various commodities, good news for consumers!
As for the real estate market of Pakistan, I agree with you all that Pakistan will be benefit with cheaper goods, lower construction costs and more investment in this sector due to falling fuel prices.
Dear Muhammad,
There are two versions of your question;
1)- Reduction in oil price shall not effect the property market as fuel consumers and investors has no direct link to each other. I don’t think saving of PKR 5000 a month may increase investment in real estate.
2)- In terms of commodity market investors, yes it shall effect but please consider stock market bullish trends. Being commodity market investor, I shall try to keep liquidity in hand by investing in stocks rather long term investment in real estate.
Pakistan’s market has its own dynamics. Lowering of oil prices should have benefitted the country, but that does not appear to be the case. Only yesterday Moody’s has issued a ratings warning for Pakistan due to its high energy import bill which will likely increase further when LNG imports start. The lowering of discount rate on the other hand, is likely to have a more beneficial impact.
Consistent low fuel prices may reduce home construction costs as the prices of raw materials like cement, steel and bricks might reduce or stay put.
Dear Muhammad,
I think it will not effect in Pak because no relations between oil prices and pak property.Oil prices Iran,Gulf and Russia with its most effective weapon.Russia and Iran are highly dependent on stable oil prices.
Regards
Oil prices do affect our daily life. But as far as real estate industry is concerned its best time to buy properties from investors point of view.
Like every one here i may say the same, there is no direct link of real estate & oil prices.
Muhammad Faiasl
replied as an individual
&
Nasir
he replied on the behalf of govt.
Govt. must take a step to use that extra reserves they are saving from Oil instead of keeping that to there pockets they may invest that in Real Estate Industry..
This oil price crash has caused a substantial decrease in our import bill which means a considerable improvement in gov account deficit. We have already seen 100bps decrease in DR to 8.5%. Inflation is at its lowest in years, around 5%. This means taking loans will be much easier for public, savings will improve considerably, so public will be able to spend more on assets including property. Gov financial figures should improve also which means they will spend much more on development projects which is also encouraging. Construction prices can reduce as steel and cement prices are expected to decrease also.
On the negative side, bigger economies are getting effected by oil price crash. BP, one of oil giants freezed employees salaries, there are talks of jobs cuts, big projects are being put on hold in middle east and west.
So lets see finally where it all ends up. Fingers crossed....
Let me explains this briefly! Due to falling oil price pakistan will benefit from it by having a cap on inflation rates means inflation will not surges like we have seen in past years and it have convience SBP to cut their interest rates by 100 basis points which will cause investors to withdraw their money from banks fixed deposit and put their money into different asset classes like stocks and real estate so i can surely say that it will have a positive impact on pakistan economy and real estate sector will likely to benefit from it
Falling prices of oil is a variable factor! But as long as Current oil production exceeds the demand for the oil then i can say that the crude oil will remain at $50/Barrel . Currently OPEC is producing more than its demand. So therefore i don't see falling oil price could rebounce that easily. So therefore don't worry about that oil will jump to their previous levels i.e $110/Barrels . As Pakistan is oil importing country we will see that inflation rates would remain stable or will decrease probably.Which will increase purchasing power of consumers and causes the economy to revive and would uplift the Stocks and real estate sector ! I hope you understand my Analysis !
Nice analysis Zohaib. You have raised pertinent points.
How do u see its impact on world economy.... Many developed economies are dependent on oil exports. Oil prices reduction is already taking on its toll on them in terms of abandoning projects, job cuts, cost cuttings. All this means slow down in economy.
The oil exporting countries like US,saudia,russia have been hit hard by oil dip in international market.especially saudia is highly dependent on oil exports but the thing to note is that still the operating cost of producing oil by oil & gas companies is low as compared to current oil prices. OPEC have said that supply will not be cut means that oversupply of oil will further plunge the oil prices in future. While US economy is quite stable infact investors are quite bullish on US dollar as well.USA have been impacted little by oil prices.I know some companies like exxon mobil & chevron in US have been hit hard because of huge inventory losses been realized but still most of the business sector remain strong. Alternative fuel discovery made by US shale oil have reduces the demand of crude oil
So in my opinion middle east countries are largely impacted by oil dip but other countries like US, europe, china are likely to benefit from it
So in nutshell Decreasing oil prices have a positive impact on world economy