Real Estate: Rollercoaster year comes to a stable close

Posted on January 1, 2015



For Pakistan’s property market, 2014 was not as great a year as its predecessor. Property prices around the country had seen their first true boom in many decades in 2013, and many had expected 2014 to offer the same sort of returns.

This was not the case, however. The year 2014 proved to be slower and more stable, dominated largely by correction as well as low activity as a result of political and security issues. At some points during the year, in and after Ramadan for example, the market even came to a complete standstill for a while. But despite its share of problems, 2014 saw pockets of excellent growth throughout as well as a stable finish.

As 2015 begins, the prevailing opinion is that it is shaping up to be a better time for the real estate market of the country. What follows is a detailed analysis of the property markets of three major cities – Lahore, Islamabad and Karachi – and their performances in 2014.

LAHORE

Lahore Cantt and LDA Avenue I performed well in 2014 and the average prices of 1-kanal plots in both localities rose by 15.89% and 24.19% respectively. In 2013, both had seen more controlled growth by comparison, gaining only 10.52% and 9.73% respectively.

For DHA Lahore and Bahria Town, the situation was quite the opposite. Both localities had a glorious 2013, gaining 31.60% and 39.30% respectively, but struggled to perform equally well in 2014. From January 2014 to December 2014, 1-kanal plots in DHA Lahore gained only 8.96% on average, while prices of same-sized plots in Bahria Town actually dropped 1.12%.

However, Bahria Town should have a good start to 2015, seeing as prices in this unique suburban development were on the up as 2014 came to a close.

Lahore Cantt was the most expensive locality to buy a 1-kanal home in Lahore in 2014. With the average house going for Rs 35,806,610 and pulling in Rs 126,720 in monthly rent, the locality enjoyed a healthy rental yield of 4.28% in 2014.

Please see the table below for average prices, monthly rents and rental yields for 1-kanal houses in Lahore’s popular localities.

Average Prices of 1 Kanal Houses in Lahore in 2014
Locality Average Sale Price Average Monthly Rent Rental Yield
Lahore Cantt 35,806,610 126,720 4.28%
DHA Lahore 35,047,341 122,625 4.20%
Bahria Town 28,373,904 90,713 3.85%
Johar Town 28,359,073 114,941 4.88%

ISLAMABAD

Islamabad’s property market had had a stellar 2013, but 2014 was fairly lukewarm by comparison. No major locality even came close to the gains experienced in 2013, and most registered controlled rises at best.

Bahria Town, which had a spectacular 2013 that saw prices shoot up by an astounding 115.15%, was the only locality to experience an outright drop in prices – 1-kanal plots in the neighbourhood lost 22.79% of their value in 2014.

Same-sized plots in Sector F-11 gained only 3.76% in value over the course of 2014 after having gained 46.06% in the preceding year. The situation was the same in Sector E-11, where 1-kanal plots gained only 6.34% in value in 2014 as compared to the 48.25% rise they had registered in 2013. Similarly, DHA Islamabad had registered a 91.97% rise in prices of 1-kanal plots in 2013, but this growth came down to 12.09% in 2014.

Sector F-11 was, by some margin, the most expensive locality to buy a home in Islamabad, with the average 1-kanal home going for Rs 65,222,018. With an average monthly rent of Rs 192,033, the rental yield in Sector F-11 was 3.54%.

Please see the table below for average prices, monthly rents and rental yields for 1-kanal houses in Islamabad’s major localities.

Average Prices of 1-Kanal Houses in Islamabad in 2014
Locality Average Sale Price Average Monthly Rent Rental Yield
F-11 65,222,018 192,033 3.54%
E-11 61,739,389 190,560 3.71%
G-11 55,584,398 174,771 3.78%

KARACHI

Karachi’s realty market also had a better time in 2013 than it did in 2014. With the exception of Gulistan-e-Jauhar, which saw a marginally higher rise in prices of 1-kanal plots in 2014 – 22.19% as opposed to 21.96% in 2013 – all major localities struggled to replicate the success of the previous year.

One-kanal plots in DHA Karachi gained 11.85% in 2014 as compared to 30.02% in 2013, while Gulshan-e-Iqbal saw a small 7.65% rise in 2014 as compared to a whopping 65.25% rise in 2013. Same-sized plots in DHA City Karachi had gained 27.88% in 2013, but managed a rise of 24.28% in 2014.

ANALYSIS

Given that 2014 has been a difficult year for a number of reasons, not the least of which is political uncertainty in one form or another, the market has shown remarkable stability. While it is fairly obvious that 2014 has been nothing like 2013, it has been far from a bad year.

Although prices and market activity rose and fell in most localities around the country throughout the year, the market ultimately stabilised towards the end and some growth was seen in the last quarter in particular.

“Prices cannot continue to rise unchecked forever, and every now and again we are going to see a more sobering year,” said Zameen.com Co-Founder and CEO Zeeshan Ali Khan. “I think the controlled growth in 2014 was a result of a correction following the perhaps unrealistic price rises in 2013, along with the uncertain political situation. But 2015 is going to be a better year in terms of activity in the property market of Pakistan, especially if the political climate – which has cooled down lately – continues to remain calm,” he added.