You must’ve bought groceries, paid your electricity bills and even tried pricing out the cost of constructing your own house. During all this, you must’ve noticed one thing and that is: nothing getting cheaper anytime soon. We can’t even say “let’s wait a few months and see what happens” because even the days are becoming increasingly expensive. Be it the rising construction material costs and revised government charges or be it persistent inflation and growing urban demand, almost everything points toward the fact that property prices are much more likely to move upwards than downward in the upcoming years. In fact, many industry experts like BinSyedi believe that by 2027, today’s prices may look like a steal.
Why Are Property Prices Expected to Rise in the First Place?
As we start on our discussion regarding forecasts and investments, a relevant query might be raised. Why do so many analysts, developers, and investors seem to believe that property prices will increase over the coming years in Pakistan?
While the reasons might differ, it is safe to say that all of them relate to certain economic realities and trends that are influencing Pakistan’s property market in a subtle manner. While inflation has come down, prices have been going up almost in every sector. Pakistan’s population keeps increasing and more overseas Pakistanis prefer to invest in property rather than risk losing their money due to exchange rate fluctuations. Moreover, regulatory charges, utility costs, and developmental costs keep rising, which means that more investment goes into building houses than ever before.
It is in our nature as Pakistani people to hear stories about how our uncles managed to buy plots of land at significantly cheaper prices years ago. While it may be irritating to hear such remarks, there is truth in most of them, at least when it comes to Pakistan’s largest cities. Throughout history, property prices in Lahore, Karachi, and Islamabad increased in line with developmental and urban needs.
1) Constructing Buildings Becomes more Expensive
A major reason why real estate prices continue increasing is the fact that developing a building project in Pakistan has become quite expensive compared to what it was some years ago. Today, developers have to spend more on acquiring materials such as steel, bricks, cement, wiring systems, transportations, fuel, and labour than ever before. Even when the price of land remains the same, the cost of developing a building increases.
Put it differently; if it costs more to develop a certain piece of land into buildings, the price at which that development will be sold to buyers goes up. If a building worth Rs. 1 crore to build today would require many lakhs of rupees more next year to develop, then obviously, the price of that development cannot remain constant.
It means that, for investors, a critical factor to note about real estate investment is that whereas many people are waiting for prices to come down, the cost of producing that real estate continues increasing.
2) Inflation Has Slowed Down, But It Hasn’t Disappeared Yet
It seems that one of the most popular myths in the Pakistan business sector concerns the current state of inflation. Namely, many people believe that since inflation has ceased to be a hot topic of conversation daily, prices must be stabilizing. However, this is not the case. Everyone, from someone who has been to the supermarket to a person who receives electricity bills on a regular basis, should know that although there have been no new records since 2023, inflation has not gone away. Prices keep rising, but at a much slower rate than before. Moreover, even relatively low inflation can significantly affect the price of a real estate or construction project.
For property investors, this is extremely important due to the fact that inflation has a huge impact on all processes related to construction. Manufacturers of cement incur more expenses for production due to inflation. Contractors increase the prices for labour, and transportation costs also grow due to the increase in prices of fuel. Landowners raise their demands, and therefore, the prices for building a project go up. For potential buyers wondering whether to purchase their property now or next year, the point isn’t necessarily that prices will increase, but rather by how much. With the help of companies such as Bin Syedi, one can capitalize on the situation before prices reflect increased costs.
3) Costs Can Rise Due to IMF Reforms and New Taxes
Whether we want to or not, IMF reforms are a consistent theme when discussing Pakistan’s economy. Although such reforms are geared towards ensuring long-term stability for the country’s economy, they may cause cost challenges in the short run that would be felt especially in the construction and real estate industry. Through changes in electricity prices and fuel prices and tax reforms, some of the new policies could lead to increased costs.
Such costs mean much more to developers than just figures on a spread sheet. An increase in electricity will increase the costs associated with manufacturing and building processes. Increased fuel prices mean that material transport becomes costlier, while additional documentation might incur administrative costs and additional taxes would affect budgeting right from the start. With these costs constantly growing, it becomes very hard for developers not to take into account these costs when setting the price of properties. For this reason, many people view this situation as a chance for investment and not just a wait until the prices become higher. When investing with Bin Syedi Construction & Real Estate Agency, it is easier to base decision-making on current market conditions and not on increased prices later.
So…WHAT’S The Investment Angle?
Predicting anything about the future with utmost accuracy cannot be done by anybody, no matter how confident the soothsayer in your living room, or the property dealer in the tea stall, or an investor might appear to be. But the one thing that can be witnessed with some degree of confidence would be the emergence of trends, and the emerging trend in the Pakistani real estate sector does not look very encouraging. There is still inflation even though it has come down from its highest ever figures where it has gone beyond 20-30% on certain occasions, the prices of materials used in construction keep increasing, the population of Pakistan is still increasing at the rate of approximately 2% per year, while Lahore, Karachi and Islamabad continue to grow faster than the development of required infrastructure.
All of this combined leads to one logical conclusion low-priced property is not something that will happen in the coming few years. Increased prices of electricity, fuel, regulation and raw materials continue to add to the cost of projects without being directly reflected in their prices.
The important thing here is not whether the price will rise; rather, what is of utmost importance is what would happen in case the price does rise when one is not yet in the market. Long-term investing involves more risk of delay than actual buying at present since the correction that will come along does not arrive.
This is where knowledgeable and informed decisions play an important role. Partnering with experts in the field such as Bin Syedi can help investors take advantage of the right phase of development in their chosen property before the prices are inflated by the high cost and demands.