Ideal time to invest

An ideal time to invest in your dream property

The sharp weakening of the Pakistani property market is playing a major role in Pakistan”s economic slowdown. The key movers are the falling housing construction and a significant rise in the mark-up rates, including those for the purpose of housing and construction. It is expected that the property prices will probably be flat or down for a while. The fall in prices in certain areas or former hot spots will be offset by stable showing in other previously unexplored parts of the country.

On the financial front, there are numerous studies worldwide support the view that property booms do not normally lead to serious busts unless or until the economy goes into a recession or some other factors come into play. The worrying factor on the economic front though is that while other countries, which have gone through a cycle of economic high, take heart in seeing the property slump as the cushion that will provide them with a soft landing, in Pakistan”s case we cannot really be sure about, (a) whether or not we have truly gone through a period of high economic growth; and (b) assuming we have, then has the period been long enough and the flight been high enough to even require a soft landing.

One argument of putting the Pakistani property market at less risk is that when compared on an intra regional basis and especially in comparison with our immediate neighbour India, we see that the prices on a national average level have not risen as much and were generally less over-valued. Moreover, even if some areas have experienced a dramatic fall in prices, the other sectors like institutional development, state development, premium property development segments, etc., have room enough for substantial “catch-up”. Such catch-up occurs when developers and the movers and shakers of the property bubble seek out alternative areas and schemes. However, on the downside the forceful argument remains that, given the very short history of the Pakistani real estate industry, it is extremely sensitive and vulnerable to a weaker economy. If anything adverse were to happen, say to our delicately held-up stock market or our consistently uneasy political equation, then a property crash could well be a resultant effect. Given that the trend of property dabbling is fairly recent and the country has a very unequal and unfair wealth distribution index, this sector is still a small component of the total individual average wealth. However, it is an area, which is growing strongly and can no longer be ignored in relation to the figures of the GDP growth rate. Ironically, due to its enhanced strength it has now become more prone to dangers arising from high and non-fixed (meaning fluid) interest rates. Needless to say, that such uncertainty and risk in turn also put the economic health of Pakistan in danger.

It would be brave to buy a residential property in Pakistan today in the face of a slowing market. However, examples around the globe bear testimony to the fact that undervalued or economically strong areas will always advance in the long run, even if the present overall market presents a weak picture. The key is to be able to avoid the current property slowdown turning into a recession.

On the bright side, one feels that in spite of the recent high inflation figures the core inflation is not yet too entrenched in Pakistan”s economy. With a proper and all-round concerted effort the level can still be checked to warrant stability or even a reduction in interest rates; a phenomenon that will go on to ensure a sustained consumer spending and regular movement in at least the business side of the property market (commercial ventures).

All in all, there are reasonable indications that though the property market in Pakistan is currently slow and has a significant downward trend, the chances of an outright crash are minimal, and more importantly, it is likely to pick up in the future. The revival period will of course depend on the prudence of governmental policies and on how well and how timely they exercise their corrective actions. For the moment, though, the prices are attractive or even undervalued in certain areas, with no imminent danger of a crash in sight. This could be an ideal time to invest in your dream property to reap long-term gains! Courtesy the Nation

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