Market Report: Property Market Presents Mixed Picture As Q4 Begins

OVERVIEW

After a rough few months for the economy in general, and to a large extent the real estate sector in particular, things are finally starting to pick up as the last quarter of the year rolls around. With the departure of cleric Mr Tahir-ul-Qadri’s followers from Islamabad, the anti-government sit-ins have been reduced to half their strength and it seems like market activity will return to normal sooner rather than later.

While this has largely been the case in Islamabad and Karachi, the latest terrorist incident on the outskirts of Lahore – a suicide attack in the midst of a packed ceremony at the Wahga Border that claimed dozens of lives – seems to have left the whole city in shock, and its markets are no exception. This has led to a bit of a mixed picture, where Islamabad and Karachi are generally doing well – all things considered, of course – and Lahore is suffering.

It is no secret that the second half of 2014 has been riddled with problems such as political instability and a persistent terrorist threat in response to the ongoing military operation in the lawless tribal regions in the country’s northwest. This had caused real estate markets around the country to go into hibernation in order to survive, but now that the situation has eased somewhat on the political front at least, this winter seems to be passing.

One key point that must be mentioned is that the real estate sector of the country was in dire need of a push to get activity started up again, which came along in the form of Zameen.com Property Expo 2014. Organised at the Lahore International Expo Centre on November 15^th and 16^th, this unique event saw more than 60 exhibitors draw over 30,000 people from all around the country and beyond, giving a much-needed boost to market activity in the process.

Let’s take a look at all three cities in more detail in order to ascertain where things are headed at the moment.

LAHORE

As stated earlier, Lahore’s market has been slow to rebound from the period of stagnancy that has prevailed since the start of the second half of the year. Apart from Lahore Cantt, which had a less-than-impressive Q3 but bounced back in fine fashion at the start of Q4, most of the localities in the city suffered drops in prices.

One-kanal plots in Lahore Cantt gained 9.67% in value on average, which is indicative of strong demand and buying/selling activity in the area. This trend is expected to remain the same in coming days because at a time when security concerns in Lahore have been heightened, highly secure residential areas such as Cantt are likely going to experience increased demand.

DHA Lahore did not have much to offer by way of gain or loss, and prices remained stable at the start of the last quarter of the year. The average price for 1-kanal plots in the locality came down a negligible 0.99%. So far in 2014, DHA has maintained a fairly flat trajectory with no extraordinary rises or falls. In an uncertain situation, this adds to DHA’s appeal because a locality that offers predictability and stability in troubled times is highly valuable from an investment point of view.

Bahria Town Lahore saw a poor start to Q4 in which the locality’s 1-kanal plots lost 2.30% of their value on average. But the most remarkable change was in LDA Avenue I, which opened the final quarter with a huge drop of 11.57% in the average prices of 1-kanal plots. This may have resulted from oversupply after possession was offered in several blocks, which led to owners rushing to sell their plots and cash in on their investments. This does tend to happen sometimes, especially in localities that have taken a long time to hand over possession.

On the housing front, Lahore’s popular localitiesretained their stable performance. Lahore Cantt remained the most expensive locality to buy a 1-kanal home in, with an average sale price of Rs 36,103,131, followed by DHA Lahore with Rs 34,646,760. Johar Town retained the highest rental yield among the top localities with 4.94%.

SEARCH TRENDS

The top performers of Lahore’s real estate market have been remarkably consistent all year. Defence Housing Authority (DHA) Lahore has been the most popular choice for investors and buyers throughout the year, and it continues to retain its position at the top of the table for both plots and homes.

Despite its remote location, Bahria Town Lahore has also received consistent interest from buyers because of its multitude of excellent facilities and amenities, and has retained second place on both lists throughout the year.

The rest of the top performers have all made their way up and down the list on occasion, based usually on important developments such as the announcement of possession or major infrastructural progress. The uncertain political landscape has also served to intensify interest in localities that are considered safer from both a security point of view and in terms of potential for returns, so the top players are likely to retain their positions in the coming months.

ISLAMABAD

It would be no exaggeration to state that Islamabad’s property market is now on the road to recovery. However, caution must be exercised for at least a little while longer because the Pakistan Tehrik-e-Insaaf’s recent political gathering in Islamabad on November 30 could have some effects on market activity.

As it stands, however, prices are on the up in all major localities, which is a breath of fresh air for the investors and buyers of Islamabad. The Federal Capital’s property market has taken tough blows to prices and activity over the last quarter, and the first signs that things are returning to normal is a sight for sore eyes.

Sector F-11, Sector E-11, Bahria Town, and DHA Islamabad have all registered price increases per our latest stats. One-kanal plots in Sector F-11 gained 1.49% in value on average, while those in Sector E-11 picked up an encouraging 2.88%. DHA Islamabad registered a small 0.77% rise in average prices of 1-kanal plots, while Bahria Town rebounded with a 3.16% increase after a disappointing Q3.

In Islamabad’s housing market, the most popular localities did fairly well, with Sectors F-11 and E-11 seeing rises in average sale prices for 1-kanal homes and Sector G-11 remaining stable.

SEARCH TRENDS

The top localities for plots and homes in Islamabad remained largely consistent, with one very noticeable change. With its upward trajectory restored, Sector F-11 knocked Sector F-10 off the list of top five localities for homes in Islamabad and claimed 5^th place.

DHA Defence headed both lists as usual, claiming 19.37% of the total searches conducted for plots in Islamabad and 14.81% of the searches for homes. Once again, the gap between DHA at the top and Bahria Town in second place was vast: Bahria Town pulled a mere 6.47% of all searches conducted for plots in Islamabad. The rest of the list comprised Sector B-17, Sector G-14 and Sector G-13.

Sector E-11 was in second place on the list of top localities for homes in the Federal Capital with 12.44% of the total searches. DHA Islamabad, which heads the table with 14.81% of searches, should be concerned because the gap is not much and it could lose its longstanding lead to Sector E-11 in coming months. Bahria Town, Sector G-11 and Sector F-11 comprised the rest of the top localities for homes in the city.

KARACHI

Karachi’s real estate sector is experiencing something very interesting at the moment. Investors seem to have pumped some capital back into the market, which has resulted in a focus shift back to under-development investment opportunities such as DHA City Karachi instead of more established societies such as Gulshan-e-Iqbal.

This has resulted in a healthy 8.03% rise in prices for DHA City Karachi, which could also signal that demand for property in this self-sustaining development is on the up. Meanwhile, Gulshan-e-Iqbal has suffered a 5.08% drop in the average prices of 1-kanal plots.

This phenomenon has affected Gulistan-e-Jauhar to some extent as well, although the society’s popularity has kept prices from actually falling. The average price for a 1-kanal plot in Gulistan-e-Jauhar remained essentially the same at the start of the final quarter of the year, with a minute 0.13% uptick.

The case was virtually the same for DHA Karachi, which saw an almost negligible 0.55% drop in prices at the start of Q4. If investor focus is moving back to under-development projects, this is good news for Karachi, which is currently host to a large number of new projects in various stages of development.

SEARCH TRENDS

As we’ve said earlier, something very interesting is happening in Karachi. For the first time in a very, very long time, DHA Karachi has been dethroned when it comes to the search for plots in Pakistan’s largest city. Bahria Town Karachi has risen to the top spot on the list of most popular localities for land, pulling 27.95% of the total searches for plots in Karachi. This is indicative of the same trend we have discussed above – the shift in investor focus to under-development investment opportunities.

DHA Karachi came in second with 26.49% of the total plot searches. While the difference is small, unseating the DHA juggernaut from the top of the table is no mean feat, and things are likely going to look up for Bahria Town Karachi. Investors should take note of this fact.

When it comes to homes, Gulistan-e-Jauhar retains first place with 19.66% of all searches, followed by DHA Karachi with 17.22%. Gulshan-e-Iqbal, North Nazimabad and Federal B Area round up the rest of the top five localities for homes in Karachi.

FINAL ANALYSIS

All in all, the start to the final quarter of 2014 looks to be a promising one. There have been certain red flags – for Lahore in particular – but there are also indications that a strong finish to the year may be imminent.

“The fact that investors are starting to pour their capital back into under-development investment opportunities such as DHA City Karachi and Bahria Town Karachi is heartening,” says Mr Zeeshan Ali Khan, the CEO of Zameen.com.

“This tells us that investor confidence, which was badly shaken by political unrest and security concerns, is now being restored. It is up to the developers now to deliver on their promises in order to make the most of this opportunity,” he adds.

Our advice is to watch things closely over the course of the next month because the investment opportunity of a lifetime may be just around the corner.