MARKET REPORT by Azka Naeem
when the Annual Budget for FY 2014-2015 rolled around and nicely coincided with the traditional slow period in and just before the holy month of Ramadan, every expert in the property sector of Pakistan knew that things were going to cool down and sputter back to life again after Eid.
What not many people had factored in, however, was the sudden escalation of terrorist activity, the consequent large-scale military operation in North Waziristan and the resulting internal displacement of hundreds of thousands of people.The political upheaval upon the arrival in the country of popular cleric Mr Tahir-ul-Qadri, coupled with the sad events of June 17, 2014 in Model Town Lahore, did not help the situation any.
But this maelstrom of misfortune was met with a characteristically Pakistani response from the country’s real estate sector: unflappable, adaptive and calm. Let’s take a closer look at how the market reacted to the developments of the last four months using data collected and maintained by Pakistan’s leading property portal Zameen.com.
Lahore’s major residential areas largely absorbed the blow from the fresh instability in the country. Without exception, all four of DHA, Bahria Town, Cantt and LDA Avenue I have shown gains in prices of 1-Kanal plots since March 2014. DHA registered an increase of 3.77% while Bahria Town gained 3.08%.
On the back of rumours and news that the Lahore Development Authority (LDA) is finally going to hand over possession of plots in LDA Avenue I, prices for 1-kanal plots in the locality surged 16.11% over the course of March 2014-June 2014.
Meanwhile, Cantt – forever short of plots and forever highly in demand – boasted an average pricehovering close to Rs30 million per 1-kanal plot in June 2014, which represents a stunning rise that scarcely indicates any sort of crash or slump in the market following the start of the military operation or Lahore’s own set of political and security problems.
|Average Prices of 1-Kanal Houses in Lahore in H1 2014|
|Locality||Average Sale Price||Avg Monthly Rent||Rental Yield|
On the housing front, DHA is still playing catch-up with Cantt, which had an average sale price of Rs36,420,041 for a 1-kanal home in the first half of 2014, by far the most expensive average price for houses of this size in the city. The consolation prize for DHA came in the form of an average rent of Rs 125,024 compared to Rs123,651 in Cantt, which resulted in a rental yield of 4.38% for DHA and 4.14% for Cantt.
Meanwhile, Johar Town registered rents that belonged in the big leagues and a rental yield of 5.19%, while Bahria Town also saw happy numbers in the housing market in H1 2014, with a 1-kanal home going for Rs26,433,973 on average and a rental yield of 4.10%. Doesn’t sounds like a market in trouble, does it?
PRICES OF 1-KANAL PLOTS IN ISLAMABAD’S POPULAR LOCALITIES
It might have been the most-searched-for locality in Islamabad, but DHA’s prices took a good a hit towards the end of the fiscal year, dropping 9.91% in the March-June 2014 time period. This fate was not DHA’s alone, however, as two other high-flying areas in Islamabad were served a bit of humble pie: F-11, the darling of Islamabad’s real estate sector, and E-11 both saw price drops of 5.55% and 4.98% respectively. This is especially significant for F-11, which has consistently been gaining in value despite the general correction underway in the Islamabad property market. Looks like it finally got to F-11 as well.
Conversely, Bahria Town and B-17 both saw impressive price rises of 10.70% and 9.85% respectively, indicating that the bottom has not dropped out of the market but investor focus has become narrower over the last few months owing to the correction.
|Average Prices of 1-Kanal Houses in Islamabad in H1 2014|
|Localities||Avg Sale Prices||Avg Monthly Rent||Rental Yield|
In Islamabad’s housing market, F-11 still ruled the roost despite feeling the heat from the correction in the market. The average sale price in H1 2014 for a 1-kanal home in this upscale neighbourhood was Rs 63,147,801, while the average monthly rent was Rs 193,083, resulting in a rental yield of 3.67%.
Despite the considerable difference in prices between Sectors F-11 and E-11,the latter boasted an impressive monthly rent of Rs 184,885 and a rental yield of 3.77%. Rounding up our table for H1 2014 was Sector G-11, which posted an average sale price for a 1-kanal home of Rs 56,418,167 and an average rent of Rs 173,133. The sector’s rental yield for H1 2014 was 3.69%.
AVERAGE PRICES OF 1-KANAL PLOTS IN KARACHI’S POPULAR LOCALITES IN 2014
In Karachi, with the exception of the mighty DHA, most of the popular localities saw upward trends in June heading into Ramadan, which was especially encouraging news since Ramadan heralds a generally slow period which begins to reverse itself around Eid. The added pressure on Karachi because of the June 9 attack on the airport and the instability that followed was not reflected in the numbers, which continued to rise for the most part.
Prices for 1-kanal plots in DHA dropped ever so slightly, 1.13%, in June 2014, but it was in DHA City where the real gains were made. One-kanal plots in DHA City gained a strong 27.19% in value over the March-June 2014 time period, resulting in an average price of Rs3,777,217 in June 2014. This should be an indication for investors to pay more attention to DHA City, which looks to be riding the train towards real estate greatness.
Elsewhere in Karachi, Gulshan-e-Iqbal managed healthy gains from March to June 2014 and posted a 12.82% increase in average prices of 1-kanal plots. Similarly, Gulistan-e-Jauhar– on the back of increasing demand for plots that are in limited supply –boasted an 18.89% increase in prices of 1-kanal chunks of land.
THE FINAL WORD
Numbers from property markets across Pakistan seem to be spelling out one simple truth: the real estate sector’s resilience should never be underestimated. All of our research clearly indicates that the sector seems to be weathering this latest storm quite well, and the fact that it is holding its own is driving investor confidence further.
“We’re one tough nation, and our economy – particularly its real estate sector – is mirroring our steadfastness in the face of all this adversity that has come our way lately,” Zameen.com CEO Mr Zeeshan Ali said.
“On the basis of the numbers we are seeing, I think it would be prudent to say that 2014 is not going to turn out to be a low-activity year. Relative to 2013, there may be a few things that could have gone better, but so far, this year has been a tumultuous one for the country as a whole, and I’m pleased to see that this hasn’t at least been translated into the real estate sector of Pakistan,” he added.