Property Prices in Pakistan after Covid-19
The global pandemic has brought a colossal change upon the face of the Earth, the property prices in Pakistan after Covid-19 have shown a big change as well. The lockdown, global retrogress, the Prime Minister’s housing scheme and the overall depression of the economy have resulted in lower prices in the real estate sector with long term implications.
Inflation a Major Cause
Due to Pakistan’s high inflation in these troubling times, house prices tend to be rapidly increasing. But that is not the case. In nominal terms, national house prices increased by 5.05 percent to PKR 10,875 (US$ 77) per square foot (sq. ft.) in 2019. When adjusted for inflation, however, house prices fell 3.98 percent during the same time span.
Property Prices in Lahore
In Q1 2019, the average house price in Lahore was PKR 10,402 (US$ 73) per sq. ft., up 6.25 percent on the previous quarter but down 2.89 percent when adjusted for inflation.
Property Prices in Karachi
In Q1 2019, house prices in Karachi averaged PKR 13,158 (US$ 93) per sq. ft., up 4.25 percent year on year but down 4.62 percent when adjusted for inflation.
Property Prices in Islamabad
In Q1 2019, house prices in Islamabad averaged PKR 9,985 (US$ 70) per sq. ft., up 7.01 percent from the previous quarter but down 2.2 percent in real terms.
The pandemic has contributed to these numbers drastically, the house pricing faces a tremendous downfall.
Impact of New Amendments by Imran Khan
According to popular belief, properties would be affordable because the government has announced incentives for the building and real estate industries.
To combat the rising unemployment and economy failures, the Prime Minister introduced the amnesty scheme and the construction package. These incentives would attract successful developers, resulting in a slew of affordable housing and commercial projects. The packages have resulted in a decrease in the prices and rents of commercial residential properties.
Impact of Naya Pakistan Housing Scheme
The Naya Pakistan Housing Scheme will also impact the property prices in Pakistan. The housing projects will be built on the outskirts of cities, in the place of government quarters and by demolishing slums. The land before Bahria Town on the National Highway outside Karachi and the Grand Trunk Road in Islamabad are examples of city outskirts.
What effect would this ideal initiative have on the prices of existing housing assets and real estate?
The prices of the PKR 60 million apartments have risen due to a lack of availability in the face of high demand. These rates will decrease as the housing supply increases. Since a person who can afford a luxury apartment is not in the same group as someone looking to buy a home for PKR 1.7 million, the effect on posh home prices is not as linear as a rise in low-cost housing availability.
Gentrification of slum areas would boost real estate prices by a major factor while lowering the cost of posh homes nearby. A more likely effect is that, in order to take advantage of the potentially huge opportunity, builders will choose to have a faster house turnover. Rather than selling 50 houses at extortionate prices and waiting for those buyers, a builder would choose to sell at a lower price and free up capital to invest in hundreds of low-cost flats.
Impact on Commercial Properties
The global pandemic provided the opportunity to keep companies operating while reducing office costs. In the modern day, where the adage of coming in before and leaving after the boss always applied, the work-from-home culture was a novelty. But with the quarantine time endured by the community, it is amazing how creatively they have begun working from their homes.
For example on Shahrah-e-Faisal in Karachi, the office-sharing portal Co space advertises a single-person shared desk for PKR 12, 000 per month. Using that as a baseline, even if ten people worked from home, the savings would be Rs1.4 million per year. For a smaller group of fewer than a hundred people, it’s not bad.
People used to buy costly front shops or pay high rents, but now that many companies are moving online, they choose to invest in warehousing. Thus, it is evident that the spread of Covid-19 has decreased the value of commercial hubs, directly causing a decline in the property prices in Pakistan after covid 19.
Impact of Travel Ban
Though the travel ban is necessary to prevent more spread of the virus, it has a deepening negative impact on the economy of Pakistan. The travel ban in countries like Saudi Arabia hinders the Overseas Pakistanis to return and invest during Eid-ul-Fitr. They are uncertain to consider investing during the pandemic outbreak. Uncertainty, in general, discourages investment. People would rather disinvest and hold cash on hand in the event that all comes to a halt, even though it is only for a short time. Because of the lack of activity in the markets, property prices have dropped from 10% to 20%.Many of those who sell during this period will certainly lose money. The Corona virus outbreak will have an effect on property prices in all cities. Since Expat Pakistanis account for the majority of investments, major markets such as Karachi, Islamabad and Lahore could be severely impacted.
Loss of Skilful Real Estate Agents
The outbreak of the virus has largely impacted the earning potential in the country, many real estate agents who gave years of dedication to the real estate sector are now cutting their ties from it. Owing to the incredibly low pay, approximately 40% of real estate agents have left the market. Due to the market crash, agents who converted to investors have lost a lot of money. According to realtors, the current property crisis is worse than the property price collapse of 2005/6. Absence of good real estate agents has also resulted in a fall of property prices since the laymen are relying on short sales basis to rid themselves of property they do not want to keep.
The property prices in Pakistan after covid 19 are falling, the reasons mentioned above trouble us but it is the troubling storms that help us rise to the challenge. We (sigma Properties) can build a promising future despite the current situation and the problems of the past.