Is The Property Bubble Going To Burst In Pakistan – How?

The biggest reason behind a property bubble has always been speculation which artificially inflates the market. As there is no real demand, every property bubble eventually bursts. Pakistan real estate bubble has fallen down once before in 2005 and caused people to lose millions in investments. Now again, we are in a similar situation but the thing that must be known is that how the property bubble will burst this time in a country like Pakistan?

Current Price Trends:

When tax amnesty scheme was introduced, Pakistan real estate was in a bubble phase since November 2016. Now due to heavy crackdown on black money, the bubble goes bursting. The property prices have dropped by 20-25%.

The Reason Behind Drop In Prices:

Investment plays an important role and has a greater impact on the price of the property because it increases the number of transactions. The number of transactions and investment, both are directly proportional to each other as when transactions are high, the prices of properties also rise and vice versa. Pakistan property market is full of black money and foreign remittances. Now that black money is blocked and restricted by SC, the investment volume has reduced and property prices are falling down.

Market Behavior:

The honest taxpayers are those who are the current buyers and want to go for buying a house for living instead of paying rent. These buyers have a low purchasing power so they only go for small and cheap properties. There are still property queries and searches available but buyers are waiting for big bargains.

How Will This Bubble Burst?

Due to the situation of investment that is inevitable, the current property prices are not stable. Now the query is that what course of action this price crash will take? The three different possible scenarios here are: soft crash, hard crash, and long inactiveness or stagnation. And due to the long stagnation, 35-50% price of property will fall, but this time the crash will be much heavier than 2005.

Areas To Be Affected The Most:

Falling or lowering of property prices will not be same across Pakistan. Some areas will blow up while others will remain in a stage of inactiveness. Those areas which are less populated; high speculation will surely blow up there. However, the areas with average population will face an average price fall. On the other side, those areas that have low price speculation and high density will face inactiveness.

Properties To Be Affected The Most?

Whenever the price crash occurs, the luxury properties are always the first victim while the low-cost properties only face price inactiveness. The reason behind is that the luxury properties are always the main target of black money by buyers. The houses that have a worth of up to 10 million PKR will have the price stagnation and high-end properties have a high crash in prices.

Losers And Winners:

Winners and losers are available in every real estate crash and the people who bought properties at their peak prices in 2017, will most probably be the losers. The reason behind it is that they bought their properties at high rates and property prices will be decreasing after the crash. On the other side, those people that will buy the properties after that price crash would be the winners because at that time the prices will be easily affordable.

How Much Time Will The Crash Take To Complete?

Some people make a handsome profit due to right timing and wise decision in every property crash. The thing that is most important is being able to correctly figure out the time when property prices will go down. Mega corruption cases have been opened by SC and as a result, investment is crashing down, so for the crash to complete, it will take only 4-6 months and further 4-6 months will be taken to bottom down the prices which will be the right time to start buying again.