MARKET REPORT: THE STARS OF PAKISTAN’S RENTAL MARKET

As is the case nearly everywhere else in the world, a lot of Pakistanis are not in a position to own a home of their own, big or small. So they choose to rent a place instead, which has contributed to the development of a thriving rental market across the country.

Pakistan’s major cities of Lahore, Karachi and Islamabad all offer great options for renting, with certain areas much more popular than others in that regard. This report – in part – will take a look at the areas that are the most popular with renters across the country.

Our readers keenly await monthly updates on property rates and other related information from Zameen.com, and this information will be part of our report as well so we can help you make the best and the most well-informed decision.

So let’s get to it.

OVERVIEW

Rental rates function a little differently than property prices. In essence, both gain or lose value based on the location, facilities, and state of a given property, but rental prices fluctuate less often than property prices, which actively respond to a wide range of external factors.

Below, we will analyse the search trends for rental properties across the three major cities for the month of July 2014. Let’s see who comes out on top.

LAHORE

The landscape in Lahore’s real estate sector is slightly different from a rental perspective, but a lot of the major players still made it into the list of the Top 5 localities for rental homes in Pakistan’s second-largest city.

According to Zameen.com’s search trends, Lahore Cantt remains by far the most desirable address for those looking to rent a place, with 16.61% of searches going its way in July 2014. Given its astronomical prices, property in Cantt is beyond the buying power of most people but since it is thesafest locality in the city, it is highly popular with renters.

So far in 2014, Lahore’s popular localities have had a slow but steady year with the exception of Lahore Cantt, which has been consistently gaining in value since April. In July 2014, prices for 1-kanal plots in Cantt crept up another 0.24%, while those of Bahria Town and LDA Avenue I went up 2.96% and 4.91% respectively. Prices in DHA dropped a minute 0.12%.

Cantt was also the most expensive locality for homes in Lahore, with an average sale price of Rs 36,679,083 for a 1-kanal home.

ISLAMABAD

Though things were more evenly spread out in Islamabad, a few of the most popular localities for homes in the Federal Capital, such as Bahria Town, failed to make a place for themselves in the rental Top 5s.

Sector F-11, which commands impressive prices as well, was at the top of the rankings with 10.53% of the total searches for rental homes to its name in July 2014.

Islamabad’s situation took a bit of an about turn in some areas. In Sector F-11, which has been flying high all year, the prices of 1-kanal plots dropped 4.74% in July. Conversely, Sector E-11, which had been struggling so far in 2014 gained 8.63% in July. Bahria Town also posted a modest increase of 3.88% while DHA Islamabad gained a strong 9.85% in July.

On the housing front, F-11 maintained its place at the top of the table with an average sale price of Rs 63,319,964 for a 1-kanal house.

KARACHI

It was in Karachi that the rental trends most closely mirrored the buying trends. The city’s top localities for homes were also the most popular choices when it came to renting, and the race was a close one for the most part.

There was a battle for the top spot between DHA Karachi and Gulshan-e-Iqbal, which the former won by just over half a percentage point.

The real estate market of Karachi presented a mixed picture in which the more established societies suffered small drops in prices of 1-kanal plots, while new entrants such as DHA City continued their good run.

Prices for 1-kanal plots in DHA Karachi dropped 2.57% in July 2014, following a downward trend that began in May 2014. Since then, prices in DHA Karachi have dropped a total of 6.72%.

Same-sized plots in both Gulshan-e-Iqbal and Gulistan-e-Jauhar also lost 1.14% and 1.87% in value respectively over the course of July 2014. This gradual drop in prices in the established areas could be because the narrow pool of investors that drives the market in all these areas has had its attention pulled towards new investment opportunities such as DHA City, which has gained 6.48% during the same time period.

Bahria Town Karachi, where only plot files are currently being traded, has also been heavily marketed in Pakistan’s largest city and has therefore been a focal point for investors ever since its much-celebrated launch.

However, localities like DHA Karachi are inherently strong ones with a lot to offer. With several new projects in and around DHA on the cards, prices are likely to bounce back as new opportunities emerge and the market picks up pace on the back of increased buying and selling activity towards the end of the year.

EXPERT ANALYSIS

Zameen.com Co-Founder and CEO Mr Zeeshan Ali Khan said the size and scope of Pakistan’s rental market had increased in recent years because buying property was no longer an option for many people due to the high prices. “Owing to high property prices, higher taxes and the increased cost of utilities, renting is much more feasible for many people now,” he explained.

He said the rental market would gear up now that Ramadan and Eid had passed. “No one wants the inconvenience of moving in the middle of Ramadan if they can help it, so the rental market is usually very slow during that time. But now that Eid is behind us, the usual activity should return to the rental sector largely unaffected by whatever else is going on in the country,” he added.

“As far as market prices are concerned, I am surprised to see that prices haven’t fallen more than they have. Things have been largely stable and undisturbed, even though a lot of negative factors have combined over the course of the last few months,” he said. “The annual budget, Ramadan, and the political instability have all played a part in bringing market activity down to a crawl. In this sort of situation, one would have expected prices to come down but the market is showing great resilience,” he added.