Investors’ confidence in Pakistan’s economy seems to be on an upward trajectory as reflected by the country’s booming real estate sector which is showing double-digit return on investment in metropolitan areas, a report says quoting Zameen.com’s annual property review.
In the backdrop of compressed commodity prices and with local stock market offering low returns, the real-estate sector is showing significant growth in Pakistan’s biggest city of Karachi, central Lahore city and capital Islamabad, according to a report by Topline Security, a Karachi-based brokerage firm.
The trend shows ample cash liquidity and investors’ confidence. Usually, real-estate and stock market move in the same direction.
Of the three metropolitan cities, Karachi topped the list where prices of 500 and 250 yard plots were up on average by 25%. DHA City prices were up on average by 67% while Bahria Town fell by 14% during 2015 due to some investor concerns though development works in Bahria Town continue.
Lahore, the second largest metropolitan area, provided good returns, where 500 and 250 yard plots were up on average by 8% during 2015. Contrary to Bahria Town’s performance in Karachi, Bahria Town Lahore was up by significant 14% while DHA Lahore remained more or less flat during 2015.
Islamabad real estate provided returns in line with Lahore, where prices of 500 yards and 250 yards were up on average by 7.5%. Sector F-11 provided highest return and was up on average by 13.5% while Bahria Town prices remained more or less flat. During 2014, Bahria Town provided significant negative returns of 23%. This underperformance of Bahria Town is because of extraordinary price escalation that it witnessed during 2013 where prices of plots were up by over 100%.
Pakistan’s leading property portal zameen.com recently released real estate property index based on prices going back to 2011. All the three metropolitan areas of the country have provided phenomenal returns to investors with Karachi outperforming both Lahore and Islamabad since 2011.
Average plot prices in Karachi have increased by 250% since January 2011, while plot prices in Lahore and Islamabad are up by 153% and 146% respectively. This shows that rising property price trend is not a short term phenomenon as it has been sustained over a longer period of more than five years.
Booming real estate market is reflective in rising demand for cements where local cement demand has been rising in double digits. Local dispatches are up 16-17% YoY during 8MFY16.
More and more real estate projects are coming on line due to higher prices and are reflective of higher construction activity witnessed throughout the country. Further, steel consumption also gets a boost by higher construction activity due to higher property prices and is beneficial for local steel players.