Pakistan Property Market: Troubling Quarter Ends On Unexpectedly Stable Note

LAHORE – The third quarter of 2014 has been a tough one for the Pakistani economy in general, and the real estate sector of the country has also struggled with decreased activity and sluggish price trends.

These three months saw everything from fiery rhetoric by political leaders to actual violence as anti-government protesters clashed with police in Islamabad and Lahore.

Talk of early elections and a possible change in government also shook investor confidence badly, and the usual seasonal burst of activity after Ramadan did not come this year as investors held on to their cash to see where the chips would fall.

The sluggishness in the market in 2014 was in marked contrast to 2013, which was an all-round glorious year for Pakistani real estate. In the first three quarters of 2013, the average price for a 1-kanal plot in Pakistan rose 28.67%. By comparison, this average price has gone up only 10.98% in the first three quarters of 2014.

But genuine buyers – people who don’t have investment concerns and are buying property primarily to use it themselves – have acted as very valuable pivots during this time of crisis. In the near-absence of investors, the market revolved around them over the third quarter, and they were largely responsible for whatever activity kept the market going. They had their share of problems as well, however, owing to the increase in property taxes in fiscal year 2014-2015.

Analysing the quarter’s activity gives us the most popular localities, prices and price trends, and rental yields, so let’s break them down city by city to get a clearer picture of the market, which might be a surprising one for many that predicted doom and gloom.

 

LAHORE

The capital of Punjab saw a massive chunk of the total searches conducted on Zameen.com come its way in Q3 of 2014. Just over 42% of the total searches conducted for plots in Pakistan were aimed at Lahore, and around 23% of the total searches for homes focused on the city.

These searches were divided rather unevenly between the most popular localities in the city. Defence Housing Authority (DHA) was, as usual, top of the list for both plots and homes, pulling 23.11% of the total plot searches and 20.17% of the total home searches in Lahore.

Bahria Town Lahore was the only serious challenger for DHA, with 15.91% of the total plot searches and 13.30% of the total home searches in Lahore going its way. State Life Housing Society, LDA Avenue I and DHA Rahbar rounded up the rest of the top five localities for plots, while Johar Town, Lahore Cantt and Allama Iqbal Town were the other popular localities for homes in Lahore.

MOST POPULAR LOCALITIES FOR PLOTS IN LAHORE IN Q3 2014

1 DHA Lahore 23.11%
2 Bahria Town 15.91%
3 State Life 3.54%
4 LDA Avenue I 3.04%
5 DHA Rahbar 1.95%

 

MOST POPULAR LOCALITIES FOR HOMES IN LAHORE IN Q3 2014

1 DHA Lahore 20.17%
2 Bahria Town 13.30%
3 Johar Town 7.52%
4 Lahore Cantt 5.29%
5 Allama Iqbal Town 4.32%

Perhaps owing more to a long overdue correction than other factors, the third quarter of 2014 was troubling for Lahore Cantt, which is one of the most prominent and popular localities in Lahore. In this expensive neighbourhood, 1-kanal plots had gained 12.61% in value on average in Q2 2014. But things took a bit of a downturn this quarter as plots of the same size lost 4.32% in value on average over the course of Q3 2014.

Elsewhere in Lahore, there were few drastic changes. DHA Lahore had another rather uneventful quarter in which prices for 1-kanal plots only rose 2.74% on average, down from 3.77% in Q2. Bahria Town Lahore, which also had a flat year apart from a drop in March, saw a 2.65% increase in the average value of 1-kanal plots in Q3, down slightly from 3.08% in Q2.

LDA Avenue I, meanwhile, has been enjoying strong numbers courtesy of its announcement to hand over possession in several blocks. In Q3 2014, prices for 1-kanal plots in LDA Avenue I went up 11.91%. Although that is less than the 16.11% rise recorded in Q2, it was still a significant gain.

 

Property price and trends in Lahore | PakistanTribe.com 

On the housing front Lahore Cantt performed better, retaining a good average sale price of Rs 36,103,131 for a 1-kanal home at the end of Q3, along with a 4.20% rental yield. On the other hand, average annual rents dropped 13.13% in Johar Town in Q3, which led to the locality’s rental yield dropping below 5% for the first time in months.

Average Prices of 1-Kanal Houses in Lahore in 2014
Localities Avg Sale Prices Avg Monthly Rent Rental Yield
Lahore Cantt 36,103,131 124,991 4.20%
DHA Lahore 34,646,760 122,449 4.24%
Johar Town 28,328,925 116,199 4.94%
Bahria Town Lahore 27,257,329 88,617 3.91%

 

ISLAMABAD

The Federal Capital bore the brunt of the political instability in the country, with anti-government protesters setting up camp in front of the Parliament building. Despite this, Islamabad pulled 28.50% of the total searches for plots conducted in Pakistan in Q3 2014, along with a healthy 19.73% of the total searches for homes.

The numbers for the top 5 localities for homes and plots were lopsided in Islamabad as well. DHA Islamabad was top of both lists with 21.36% of searches for plots and 15.81% of searches for homes in the city.

Bahria Town was once again the only real challenger for DHA when it came to plots, and Sector E-11 nipped at DHA’s heels in 2nd place on the list for homes, just a hair ahead of Bahria Town. Other popular localities for plots were Sectors B-17, G-14 and G-13, while Sectors G-11 and F-10 rounded up the list for the most popular localities for homes in Islamabad.

MOST POPULAR LOCALITIES FOR PLOTS IN ISLAMABAD IN Q3 2014

1 DHA Islamabad 21.36%
2 Bahria Town 7.28%
3 Sector B-17 4.84%
4 Sector G-14 3.99%
5 Sector G-13 3.07%

 

MOST POPULAR LOCALITIES FOR HOMES IN ISLAMABAD IN Q3 2014

1 DHA Islamabad 15.81%
2 Sector E-11 9.92%
3 Bahria Town 9.21%
4 Sector G-11 6.90%
5 Sector F-10 5.70%

 

After a stupendous 21.88% rise in prices in the first quarter of 2014, Sector F-11 has had a lacklustre year so far owing to the correction that followed. In Q2, prices for 1-kanal plots in the sector came down 5.55%, and dropped another 5.89% in Q3 to land roughly where they were at the start of 2014.

Sector E-11 bounced back from a disappointing Q2 – in which its 1-kanal plots lost nearly 5% of their value – with a solid 14.57% gain at the end of Q3. Bahria Town took a nosedive, with 1-kanal plots in the locality losing an astonishing 19.70% of their value in Q3.

Meanwhile, DHA Islamabad largely made up for its 9.91% loss in Q2 with a solid 11.67% gain over the course of Q3. A 1-kanal plot in DHA Islamabad now costs more to buy on average than a same-sized plot in Bahria Town.

Property trends and price in Islamabad | PakistanTribe.com

The housing market in Islamabad fared much better in the third quarter. One-kanal homes in Sector F-11 gained 9.91% in value from July to September, which is in stark contrast to the 3.13% drop they experienced in Q2. The same was the case with Sectors E-11 and G-11, where prices for 1-kanal houses went up 7.33% and 6.27% in Q3 respectively.

Average Prices of 1-Kanal Houses in Islamabad in 2014
Localities Avg Sale Prices Avg Monthly Rent Rental Yield
Sector F-11 64,024,502 189,455 3.56%
Sector E-11 61,312,829 188,969 3.70%
Sector G-11 55,614,259 172,852 3.74%

 

KARACHI

Karachi pulled 30.33% of all home searches conducted on Zameen.com in Q3 of 2014, and 8.77% of all searches for plots went its way. Pakistan’s largest city is currently spoilt for choice when it comes to investment opportunities. From very high-end projects on the Arabian Sea coast to excellent developments further inland, investors and buyers have their pick.

The most popular localities for plots in the city were DHA Karachi, Bahria Town Karachi, and DHA City Karachi. The fact that the latter two are still under development seems not to have bothered anyone, and interest remained high. The list for the most popular localities for homes was not as lopsided in Karachi as it was in Lahore and Islamabad. Gulistan-e-Jauhar led with 19.31% of the total searches for homes in Karachi, followed closely by DHA Karachi and Gulshan-e-Iqbal.

Gadap Town and Gulistan-e-Jauhar rounded up the top 5 localities for plots, while North Nazimabad and Clifton were the other localities that saw significant home searches come their way.

MOST POPULAR LOCALITIES FOR PLOTS IN KARACHI IN Q3 2014

1 DHA Karachi 32.49%
2 Bahria Town 18.28%
3 DHA City Karachi 13.14%
4 Gadap Town 5.39%
5 Gulistan-e-Jauhar 5.32%

 

MOST POPULAR LOCALITIES FOR HOMES IN KARACHI IN Q3 2014

1 Gulistan-e-Jauhar 19.31%
2 DHA Karachi 18.89%
3 Gulshan-e-Iqbal Town 15.26%
4 North Nazimabad 6.63%
5 Clifton 4.12%

 

In the second quarter of 2014, DHA Karachi struggled to maintain the momentum it had at the end of the first quarter. One-kanal plots in this highly popular locality had lost 1.13% of their value on average by the end of Q2. But Q3 turned out to be a good quarter for DHA Karachi with a 6.70% increase in prices.

Conversely, Gulshan-e-Iqbal, which had enjoyed a 12.82% increase in the average prices of 1-kanal plots in Q2, underwent a 3.03% decline in prices in Q3. Gulistan-e-Jauhar continued its upward march with a 2.67% increase in prices of 1-kanal plots in Q3, but this was down significantly from the 18.89% gain in Q2.

After a great Q2 in which 1-kanal plots in DHA City Karachi gained 27.19% in value, DHA’s latest venture in Karachi was brought back down to earth with a sobering 5.08% drop in prices in Q3. Since investors are being very cautious with their money because of the tumultuous political situation in the country, DHA City Karachi may be seeing interest dry up for the time being.

Property rates and trends in Karachi | PakistanTribe.com 

FINAL ANALYSIS

Considering the political situation that has prevailed in the country since the start of the quarter, these are great numbers across the board. The common expectation throughout the quarter was that these disturbances in the political landscape would take a sizeable toll on the market, but the numbers say otherwise.

“This quarter has ended on a high for many localities around the country and even though some areas didn’t do as well, I’d still put this in the win column. The year 2014 has been a very odd one that didn’t exhibit the same patterns as those before it, and it has seen its fair share of troubles,” said Imran Ali Khan, the Co-founder and COO of Zameen.com.

“In this sort of situation, for so many developments to perform so well should serve as an important reminder for all of us that the country’s real estate sector is far stronger than we give it credit for. As we head into the final quarter of the year, I expect things to look up as the market builds momentum on the basis of a good third quarter,” he added.

Video

Subscribe PakistanTribe’s YouTube Channel