Real Estate Market over the last 50 years in Pakistan
If you are entering into real estate, then it is very important for you to know the history of Pakistan real estate. Two main things that have a high impact on the real estate sector of Pakistan are the high population growth and rural-urban migration. These two factors offer huge investment opportunities for real estate. As more and more of the population flock and career opportunities happen for the career seekers. As a result, the real estate prices continue to skyrocket. Consequently, these factors indirectly generate high levels of opportunities for ancillary sectors. Such as cement, brick, steel, paint, and other building materials.
Furthermore, the recent report of the World Bank shows that Pakistan’s real estate economy contributes 60-70% of the country’s wealth. Which is equivalent to $700 billion.
Moreover, construction and housing sectors ‘contribution to the country’s GDP is higher than 9 percent over the past decade. – according to the SBP statement.
The 1970’s Real Estate Market:
In the 70’s during Bhutto’s period, the Real Estate market was growing. Bhutto introduced an Amnesty Scheme in 1973. But post-Election riots and a disastrous flood crashed the market in 1977. LCCS and DHA Lahore came into being in the same decade.
The 80’s had a poor start; Pakistan was focused internationally with the onset of the Afghan War. As a result, the war. In the same decade Pakistani President, Gen Zia ul Haq suddenly died in a plane crash in 1988. This political uncertainty crashed the market once again.
The 1990’s Real Estate Situation:
Year 90’s was a lucky decade. It started a slow recovery and property prices thrived from 1992 to 1994. Moreover, the smart investors understood the true potential & showed interest in investing in the real estate business. As well as plots, business started. And it resulted in the pop up of the newer societies.
After a few years of slowness, it gathered pace again by the middle of the decade. The recession started in the year 1997 by the disastrous rains and power crisis. And it continued till 2001.
Though, real estate became the biggest tool in Pakistan even without any proper regulations and taxes in the ’90s and 2000’s.
The 2000’s for Real Estate Market Pakistan:
In 2000 the property began to boom after the 9/11 incident. Breaking all previous Pakistan real estate records. However, the bubble guts by 2005. When majority of the population couldn’t afford to own their own home due to over-inflated prices. The Govt seen failed to take appropriate action. Moreover, the real estate of Pakistan became tax heaven. And speculative trading in plots became the most preferred investment.
2010’s Real Estate Market:
After a slow recovery from overpricing, the market rose once again in 2013. And by the end of 2015 we saw property reaching new heights. In this year residential property such as apartments, houses, and plots increased by 5% to 7%. Whereas commercial property increased by 15 to 20%.
In 2016, everything changed when the sitting Govt. approved an revision to the Finance Bill 2001. This was an effort to overcome the unregistered and undocumented investments. But it also resulted in slowing down the market.
Hence, a large portion of white economy investments fell into the grey economy. And instead of investing in the production industry, investors are seen going for unproductive plots trading. Thus, the money of investors eventually got stuck.
Moreover, the record appreciation of the Dollar against PKR put the market down by at least 50% in 2018 & 19.
Generally real estate growth rate all over the world is 5 to 8% per annum. However, Pakistan inflates up to 40 to 60% growth rate per annum. Well, when we study, the reason is obvious. Recession directly results in over-pricing. The real estate pattern of the country remained unchanged for 43 years. 4/5 years amid the highest of the recession and the peak of the boom. The proportion of average price increment of populated areas is 4 to 5%. However, unpopulated areas are about 9 to 10%.
In the time of recession, the prices in populated areas typically fall from 0.5 to 1% and unpopulated areas fall to almost 5% or even as low as 50%. Additionally, the populated areas represent the genuine end-user market. While unpopulated is a hive of speculative investments.
The Govt then introduced a no questions asked policy about the source of the capital. This policy had made real estate an ideal sector spot to park black money.