Re: Property mania in Pakistan..
ShamsiAli :The next thing, CBR is collecting data of all these people and sooon it will be like KSE.
Fraudia: Correction of 5000 point never heard that before.
Re: Property mania in Pakistan..
bookworm, well big correction for big too hyped up levels. the bigger the issue, bigger the correction.
shamsi, you are right, the prices are not sustainable, and i suspect that the default rates on loans will be quite high as well. only saving grace is that maybe the ppl who are financing these at 80% of their takehome pay are living in a combined family system where others share in the mortgage costs or household expenses.
Re: Property mania in Pakistan..
Please guys, don't get me wrong. I love my country as the next guy but this hype is not helping the poor and working class families. Most of this maney is going to the pockets of maximum 100 people wich includes big KSE brokers, government officals and their relatives . If these bastigis lose then I don't feel sorry for them. They will take this money out of Pakistan the first chance they get instead of investing in the local economy and creating jobs. Empty plots don't contribute to economic development and big building are useless if middle class can not afford to live in them. May Allah bless our country.
Re: Property mania in Pakistan..
U know guys, may be i am wrong about this, but i think
Stock market ups and downs are mostly because of foreign investments. So, when KSE Index started going up everybody tried to jump into the boat, due to higher demand shares prices also went up, Then all the foreign companies started taking out their money for profits(which i dont blame them, caz who does not want to make money, would't u) and then all the ppl like us, got panicked, and started taking there money out. and stock market crashed.
After the crash, all of us started doing the same thing, which we are good at. blaming the Govt. Even PM kept telling us, dont invest bluntly or dont invest every penny that we got. But we did not listen, and at the end, when it was going all down the hill, we woke up and started cursing our govt.
Now the real estate, i think, every time when govt. drops down the interest rate in savings accounts, ppl tend to take out their money and buy property. And i think, there are couple of other factors too, like easy excess to home mortgage, and all the money flow that came into pakistan after 9/11.
So untill, the interest on saving accounts are low, we will see higher prices, the day they will bump up the interest rate, ppl who bought properties for business purposes will loose money.
Re: Property mania in Pakistan..
I am in the market to buy a 500 yard house in DHA Karachi for my parents. I do nt want to spend more than Rs. 10 - 12 million. I guess I am going to wait a couple of years to do it. I think this is more than fair price for that area. Right now these places are at Rs. 17 -20 million which is way over priced in my opinion. Do you guys have suggestions?
Regards,
Re: Property mania in Pakistan..
in pakistan property never goes down and everyone who says its too high and it will come down are only dreaming and upset that they never bought anything a few years ago. its just how it is because everyone is also buying at these prices or they wouldnt be this high and its not about making money only. people live in these houses and properties as well so its not like their going to sell easy anyway and in pakistan, its not safe to have your money in the bank, everyone has their money in property in case something goes wrong w/the rupee or govt or whatever so its the safest invesment wherever it is.
Re: Property mania in Pakistan..
i dont think it is a good idea to put all you eggs in the same basket. Diversification is the key from getting burned. Property values have already come down by 15-20% in Pakistan from what I have heard, the only stable propery currently is in Islamabad and Gwadar city.
Re: Property mania in Pakistan..
I completely agree that the market is in for a huge correction. My BIL wanted us to invest recently, saying that some plot values are going up 10 times or more in Isb. I told him that at this point if they are 10 times more it is already too late to invest. Those who will come out of the property boom wealthier have already bought, and many are probably selling at this point. This market is simply not sustainable, given the average take home pay of the middle class, or any other economic indicators.
My fear is that others like my in-laws who are sinking their entire savings into these plots thinking that it is a solid investment will lose a fortune. The same rules and qualifications that determine financing in the US should also be followed, to a certain extent, to prevent catastrophes.
Re: Property mania in Pakistan..
I think Yusuf1982 is a propert dealer or has some property he needs to get rid off. :)
I respectfully disagree. Just look at the history. In Nawaz Sharif's time same thing happend and prices went up. After nuclear tests everything tanked and stay that way for a few years. Every 7-10 years this happens and everybody jumps on the band weagan. Later comes the crying and selling frenzy in which regular people lose millions.
Re: Property mania in Pakistan..
actually the average middle class person still can’t afford to buy their own home.. it’s the cash coming in from abroad that has created the bubble..
Re: Property mania in Pakistan..
one thing i would like to tell everyone is that i have not seen islamabad's real estate value go down in the last 20 years or so, it may stabalize at one point for a few years but it does not go down.
Re: Property mania in Pakistan..
who has missed the boat ? Its not like only pak-istan is the only country in the world where there is a property mania.
Prices of houses have increased dramaticly in New York , florida, southern california, London, dubai etc. If you have houese in these areas then you have not missed any thing and you will get good inventment in real estate.
As world population increases and urbanization increase, naturally house values in urban areas will increase.
Re: Property mania in Pakistan..
all the property increase in Clifton and other rich areas of kara-chi and lahore will come down. THis whole property mania was started when overseas people started coming in and hence there was more demand and hence more incrase in property value.
But all of these property values will come down from the sky. Pak-istan is still a poor country, and most people can not affort those prices, hence less demand means less prices of these houses in the long term.
Prices of houses in clifton karachi can not be expensive like western cities. All this property mania in pakland will burst.
Re: Property mania in Pakistan..
an average single man with and average income cannot afford to buy a decent house in toronto either! prices are krazy nowdays!
Re: Property mania in Pakistan..
As Sherlock Holmes wud say "Its elementary Dr Watson".
This asset price appreciation has been caused by an extremely aggressive easy monetary policy pursued by central banls across the globe. Five years ago, commercial financing was at 20%+ in Pakistan, well not today but at the bottom rates had dropped to 5%. Bank flushed with excess liquidity are finding it difficult to build loan portfolio's without concentrating risk. Thus the innovation of new investment schems and loan packages. Today banks are in the business of financing consumer and mortgage loans which has created this huge demand for assets in Pakistan. US is also the same, with stock market crash in 2000, investors were given excess liquidity by tax cuts and lowered interest rates. As investors shied away from stocks, they went to the best market they cud invest i.e., property, this created its own frenzy and capital appreciation with lowered rates provided investors with refinancing opportunities and single homeowners went to two and three ownerships.
Lower Interst rate policy is over, maybe its temporary but rates have started to move higher in US, OECD and Pakistan. With inflation becoming a serious issue, its very unlikely rates will come down in Pakiland, SBP has already indicated its resolve to fight inflation, though a tad late in their decision to reverse trend.
Having given a detailed schpeel on how smart Iam, let me say real estate markets in the developed ares have always been up with slight dips which were buying opportunities in the 20-30year cycles. For the punters, speculators this market is attractive when prices are appreciating 20%-30% in 6-12Months, well that has not been the case always and cannot be duplicated every year. Guys, we have seen the biggest bull run in the real estate market, its time we saluted those who went in at the right time and offer our sympathies to those who wavered and lost out. GOD Bless Alan Greenspan, Ishrat Hussein and all those great Central Bank Governors for creating so much wealth, now they have to manage this asset inflation lets c what they do......
Re: Property mania in Pakistan..
The supply of land with clear title is limited in Pakistan, so people cannot buy new properties if they sell. In addition, I would think, wealthy middle eastern families, flush with cash generated by rising oil prices are adding to price pressures. They probably think Pakistan is a good investment because the USA and the west may want to encourage economic development in pakistan to prevent extremist radicals from taking control of a nuclear power. Barring a political meltdown, I dont think the surge in land prices has to end until oil prices start to decline, battle on terrorism ends or Pakistan has land reform. Since, banks are just getting into the mortgage business, these prices may not come down anytime soon.
bob
Re: Property mania in Pakistan..
^^
You make a valid point on the petrodollar factor contributing to this asset price inflation. Though, the logic to strenghten Pakistan and weaken radicalism may prove a worthy cause in the short term only. It is a well known fact that petrodollars were the primary drivers behind the rise of extremism in Pakistan and other muslim countries. A changing world has forced the same financiers to re-package themselves, yet the end product will remain the same. Therefore, some caution in that respect will be required.
Land is in abundance in Pakistan, only problem is the concentration of ownership. This concentration can be in the form of large feudal estates or Governmental owned properties or semi-government entities (DHA, Malir, Local development bodies etc etc). Getting land released is the real problem and establishing legal rights over ownership which has forced investors to concentrate on select areas (DHA) to avoid any legal wranglings. Another factor is the mafia's involved such as land grabbers and extortionists, such nefarious characters are well connected and hv been able to thrive in a bull market. Therefore, land ownership rights hv to be made transparent and binding for investors or home buyers to start going out of the select areas. Once this happens, prices will find a much better balance.
Re: Property mania in Pakistan..
Just another example…
http://jang.com.pk/thenews/index.html
Real estate lobby scuttles tax deduction proposal
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By Ikram Hoti*
ISLAMABAD: The powerful real estate lobby has defeated a proposal to detect their actual income. The modus operandi used by them to scuttle the proposal was to disallow budget makers from inserting a law for monitoring incomes and transactions in real estate for tax deductions.
The budget proposal this time erupted from cross sections of experts and government institutions keeping in view the vast frauds being committed through under-valuing the estate prices on documents.
The proponents mostly referred to the Indian law of dynamically fixing the book value and monitoring transactions on real estate for detection of tax theft and real incomes that are grossly understated by most of the estate tycoons. These tycoons have mostly come on the investment scene of Pakistan, especially in the post-9/11 inflows of greenback and sterling money from United States and Europe.
The Indian law, which is about four decades old and has been implemented to cause ripples in the lobbies that place their undeclared money in the estate through value-suppression, provides for catching the thieves.
The administration putting it in practice confronts the buyers and sellers with the clearly drawn up local benchmarks that are dynamically changed as per the swing in the market.
Such swings have recently hit the federal capital of Islamabad, all the four provincial capitals of the country, and major 17 towns, including Hyderabad, Multan, Gujranwala, Sialkot, Mardan, Faisalabad, Sukkar, Nowshera, Gujrat, Bahawalpur, Okara, Murree, Rawalpindi and Jacobabad.
Internal surveys of various departments related to real estate and property valuation indicate that the price swings and the buying culture has brought out money never anticipated in amounts and speed of circulation, leaving the tax authorities in total anarchy over its activity for detecting the incomes and transactions.
The budget proposals in this connection never reached the parameter-fixing authorities despite being floated by most relevant sections that made efforts to impress upon budget-makers that in view of the government devolution plan and decentralisation of fiscal powers, the district governments should be enabled to monitor these transactions for local income generation and for the federal coffers.
Most interestingly, the authorities proposing insertion of this law have also pleaded on grounds that the Benami practices, against which the government is pronouncedly making efforts, would be defeated by such a law, but to no avail.
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