Real estate represents a significant portion of most people’s wealth, and this is especially true for many property owners in Pakistan. An average Pakistani has nearly one-third of their net worth tied up in real estate, most probably because the returns from the real estate market make it an attractive sector for investment for many.
Pakistan’s demographics play an important role in sale and purchase of real estate in the country but are often ignored because of lack of knowledge. The values within the property market and what kind of properties are in demand are deeply affected by Pakistan’s demographics. With the concept of joint families still intact in Pakistan, a major demographic of the population, when looking to rent or buy, would prefer to look for a singular property with two or multiple independent portions to house nuclear sub-families.
“The joint family system creates huge demand for larger homes, even if incomes are smaller, because in Pakistan children do not usually move out when they turn 18 but continue to live with their parents even after they get married. For this reason, the average home size in Pakistan is larger than many developed countries, and they see sustained interest from buyers and renters across the board,” says Zeeshan Ali Khan, CEO of Pakistan’s leading property portal Zameen.com.
Interest rates have a significant effect on the property market because even the slightest change in interest rates can enormously impact an individual’s capability to buy property.
The stock markets of Pakistan often fluctuate rapidly because of socio-political and economic instability, which then has a domino effect on interest rates as well. Since a large section of the Pakistani public buys residential properties using loans based on interest, fluctuating interest rates affect activity in the market.
An additional key factor that influences the worth of property is a sound economy, or lack thereof. This is measured using financial indicators, for example GDP, work information, manufacturing activity, costs of products, and so on.
“Generally speaking, when the economy is languid, so is the real estate market,” says Zeeshan Ali Khan. “Nonetheless, the cyclicality of the economy can have shifting impacts on diverse types of properties. While the prices of plots and houses may vary due to economic ups and downs, tenants generally have long-term rent agreements that cannot be altered in the middle of an economic downturn, for example.”
Government policies are another factor that can have an impact on property demand and prices. Taxes and subsidies are ways through which the government can momentarily manipulate demand for real estate, and it goes a long way to be mindful of current government actions and motivations, which can help you distinguish real demand from pseudo trends.
These are the four key factors that play a major role in shaping the trends within the real estate market.