Please give your view/opinion regarding effect on property due to increase in discount rates
At this point in time, there will be no effect. Three months ago, they lowered it by 0.5%, now they have increased it back by 0.5% but delayed the date for next policy announcement in January, which means rates will remain constant for the rest of the year. If anything, it might have a positive effect.
I have a feeling that property bubble will burst soon similar to what happened 3-4 years ago. This is due to there has been no improvement in crime rate, gov instead in coming out with outlandish and absurd new plans about new airport and new twin cities, when they cant even sort out the bombings, crime, social deprivation, electricity etc…the question is when will the bubble burst…something to bear in mind! maybe next year or year after!
Well regardless of whether that happens or not, a lot of this “bubble†discussion is too generalized treating the whole city uniformly, which is a mistake. I think we can probably divide the price rise phenomenon into 3 categories to make better sense of whats going on. These are:
Purely Speculative/Idiosyncratic Rise: These are areas where prices are rising but there is no tangible development on ground or specific reason to explain as to why that is happening. Prices are rising rapidly for unexplained reasons (sometimes inaccurately attributed to demand & supply) e.g. G-14/1/2/3 etc.
News based Speculative Rise: These are areas where prices are rising because there is news of some positive development related to that area although a lot of that is still in the news and there is nothing on ground yet, related to the news. So prices are rising in anticipation of some future development e.g. E-12, F-16/4 etc.
Development Driven Rise: These areas are seeing price rise because of tangible and visible development on ground, which may include giving of physical possession of plots to allotees, construction of a new access road or any other infrastructure.
Personally, I feel that areas falling in category 3 are likely to have a stable rise in prices and can be considered as relatively low risk for investment, whereas areas falling in category 1 can be rated as high risk, in case property prices start taking a downturn sometime in the future. Atleast thats how I would manage my investment risk.
I agree with syed amjad, you have broke it down well. I think the first two categories are likely to be effected but as you mentioned 1st is more of a risk. We will have to wait and see what happens.
Sheikh sab..:) why are u having a negative approach about the property or real state..one should be optimistic yar ..lets pray and hope that people will have safe and profitable investment and our country will flourish as a whole. Say Gud luck to all rather than every time saying bubble burst and bubble burst..why to burst the bubble ?? why not to blew it big.. So stay happy & lets pray that the difficulties being faced by us will be overcome soon..we can do it together. Regards
Personally, I think a slowdown seems more likely than a burst, as the IMF is also forecasting a slowdown in Pakistan's economy this year, although speculation thrives when the productive sectors are suffering. I think if the SBP keeps raising rates beyond 10%, it could serve as a warning sign, but for now it seems fine.
I also thought it would have been good to prepare a list of which areas fall in which of the 3 categories by getting input from members, but then I dropped the idea as I think we will get into some difficult and possibly contentious debate. Although I have made a tentative list for my own use.
One liner:Slow growth in prices can be the case but bubble cannot burst because it is not a bubble =)…iTS THE PRICE HIKE WHICH EVERY COMMODITY IS FACING…
SyedAjmal catagorise the property nicely into 3 catagories. High Risk properties could take some property decline at some time in future but where development is continuously going on properties will continue to rise and may be at slower pace as SAADI said
I think even the relative slowdown which might occur will be for a short while as there are all sorts of positive as well as negative news coming out and most people are just trying to make sense of what is going on. I think soon, things will be settled, a lot of confusion will be gone and prices will rise at their normal rate.
Btw, the SBP is predicting an inflation rate of 12% for this year, so thats the minimum increase you can expect. Add to that devaluation, I think 20% increase is almost a given. Increase beyond that will be the real gain.
@ bluedoc, I am generally optimistic about real estate, however, after watching the news, they show the bombings going on, social deprivation and mr sharif in meetings announcing a new project, which the old projects are not even complete which is a joke etc…and then you see the new gov plans of building cities a genuine excuse of filling there own pockets. With that money if they really cared about the country they honestly turn it around in no time and the main places like Islamabad, Lahore and Karachi would be dream places to live and would be become the next Dubai. In the current climate, and after reading all your brothers comments, I agree there will be a decline - slow down in prices which will correct themselves rather than a complete collapse! we an only prayer for the best and wait and see what happens…
Please someone atleast give some examples of category 3 properties for the benefit of people…just share your opinion please…
@ShumailaShah. I think many members will have different opinions on this category, but the best part is that its easy to verify, by making a site visit to see for yourself as to whether any development work is taking place.
I can share a few examples from my list of category 3 properties with reasons. These are:
Bahria Phase 8: Construction work is in full swing and some blocks are also near possession. Mumtaz City: Development work is progressing fast, both in the society and on the airport. AWT: Construction Work on motorway interchange in full swing, will be ready shortly. PECHS: Good progress on new blocks but uncertainity over road link to KH. B-17: Work on Margalla avenue has slowly resumed, if it gathers some pace, its prices will also rise rapidly. DHA Phase 7 Lahore: Development work is almost complete, you can actually visit your plot, possession expected within months.
As you can see, some of the options included are non possession as well, but the development momentum on ground is good enough in these areas to justify their inclusion in the list. It all depends on the investors risk appetite. Other members can offcourse, differ from my suggestions.