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Like most parts of the world, inflation in Pakistan has also reached a record high.
According to the Pakistan Bureau of Statistics, the National Consumer Price Index (CPI) for August 2022 recorded an increase of 27.26% over August 2021. The report also stated that Urban CPI rose by 26.24% during this period, whereas Rural CPI saw an increase of 28.79%.
Moreover, the prices of food items have gone up manifold, making it difficult for the lower and middle-income groups to buy meat, poultry, lentils, vegetables, and milk. Similarly, the electricity and petrol rates have also increased substantially.
Needless to say, the impact of inflation on real estate has also become quite evident. Since there is a direct correlation between inflation and the housing market, the prices of homes in Pakistan have also skyrocketed. Home construction has also become quite expensive, leading many prospective homebuyers to shift their sights from building houses to investing in apartments, as the latter option is better suited to adjust to inflation and offers a high ROI.
Historically, buying property is considered a hedge against inflation. Since home values traditionally keep up with the rising prices, investing in real estate during inflation could be a wise decision. However, not knowing where to start your search for a home when your income is not rising at the same rate as the prices of commodities can have a negative effect on your budget.
So, if you are hoping to buy a home despite the current situation, here are some tips that may help you find the right option while cushioning the blow to your bank account.
3 Things to Keep in Mind When Buying Real Estate During Inflation
Have you found yourself wondering “is real estate a good investment during inflation?” If so, the answer is yes.
Buying a home in such uncertain conditions may be challenging, but it is certainly not impossible. Since Zameen.com is dedicated to presenting its customers with the best property solutions, here is a list of strategies that can help you mitigate the impact of inflation on real estate.
Look for Properties in Low-Demand Areas
Investing in housing societies or posh neighbourhoods might be the top choice among those looking to lead a quality lifestyle, but doing so could be a little difficult when the real estate prices are rising at a higher pace than your annual salary or income.
Therefore, if you are planning to invest in real estate during inflation, you should consider reassessing your choices and requirements. Instead of focusing too much on high-performing areas, you should consider buying a home in property hotspots. These are high-yielding areas usually situated in proximity to established performers. Their real estate prices are substantially lower as they are still undergoing developmental work and thus have a relatively low population.
You can also check out our guide on how to identify emerging property hotspots for more information on the topic.
Choose the Right Type of Property
The type of property you are planning to buy can also have a huge impact on your budget. For example, if your budget to buy real estate in 2022 is the same as it was two years prior, you may want to take a step back and reconsider what you are trying to achieve.
If your goal is to buy a family home, then you should consider looking at projects on the outskirts of the city or in newly developed areas. Investing in new apartment projects could also be a good idea as many developers offer attractive payment plans to facilitate buyers. It is also worth mentioning that prices of luxury houses and plots in prime locations tend to rise at a higher rate than affordable properties.
Since buying a plot and building a home during inflation can be quite heavy on your pocket, you can also look at slightly older constructions that require minimal upgrades. If you have more questions on the matter, our guide on buying a new house vs an old house can help you out.
Look For Undervalued Homes or Fixer-Uppers
Another tip for investing in real estate during inflation is to expand your search for fixer-uppers and properties that are presently undervalued. Although this can be a little tricky, working alongside a trusted real estate agent can help you find good deals in no time.
However, investing in fixer-uppers can be a slippery slope if you don’t proceed with caution. Since the prices of construction materials and labour are rising across Pakistan, repairing or renovating a house with major damage may cost you a lot more than you initially expected. Hence, make sure to hire an expert to conduct a thorough property inspection and weigh all your pros and cons before making a decision.
Buying fixer-uppers in a high inflation environment could be a good business strategy if you plan to fix and flip them for a profit. While this may require a lot of hard work, making some small upgrades to an undervalued property can help you sell it for a higher price in the market. However, make sure to avoid the common house flipping mistakes if you don’t want your venture to flop or incur a huge loss.
To conclude, the correlation between inflation and the housing market may make it difficult for homebuyers to find a property of their choice under their given budget. However, as long as you follow these basic tips, you will hopefully be able to circumvent the impact of inflation on real estate. Just be sure to do your research, understand the latest property trends, and reassess your budget before signing below any dotted lines.
This brings us to the end of our guide on investing in real estate during inflation in Pakistan. To learn about affordable property investment opportunities in your city, please stay connected to Zameen Blog – the best real estate blog in Pakistan. You can also share your concerns and feedback with us at blog@zameen.com. Last but not least, don’t forget to visit and like our Facebook page.
