Impact of currency devaluation and political situation on Real Estate in Pakistan
Impact of currency devaluation and political situation on Real Estate in Pakistan will focus on two of the macro economic factors effecting the country right now. This study will help us better understand the real estate movement with regards to these two factors.
A graph at the end has been given for a better understanding. Currency devaluation has little or no effect on the local property market as the rates are stable. However, due to inflation as a whole the prices might actually rise. This will give an edge to the foreign investor in Pakistan’s case it is mainly the Chinese firms and individuals who will have a greater advantage. Currency devaluation itself won’t budge the prices that much. This might actually have and inverse impact in the longer run and prices might actually rise a bit.
This was brought into consideration because the Pakistani Rupee is continually going down. People are scared as to what the impact would be on the real estate market. There is no immediate impact on the real estate market. Once foreign investment starts coming in due to currency devaluation and inflation rises locally only then will the prices start going up. There is no need to panic it’s a directly proportionate relationship between the real estate market and currency devaluation.
This will initially effect the small plots and ultimately the impact will be seen in bigger sized plots. Commercial property will be at the end of the price hike chain. However, residents residing in semi-commercial areas might experience the upward trend sooner.
As the political situation in the country worsens we can expect that the property market will go down further. Politicians will soon start selling their properties to raise funds for the election campaigns. This would create a major influx of properties for sale. When more properties will come for sale a simple supply and demand rule will come into play and the prices will go down. If this influx of sellable properties starts it would turn out to be an ideal time for investment.
Politicians are expecting an election in 2018 whereas there is a slight chance of interim government coming into play. If the interim setup takes place and political situation stabilizes the prices will eventually start increasing at a very rapid pace. Even after a normal election we can expect a rise in prices. This will mean that if politicians start selling to fund their election campaign one can expect a downtrend in prices. It is already an ideal time for investment nonetheless, but a further decrease will help two kind of people. One who are cash ready, secondly the ones with the holding power.
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Managing Partner Imlaak
MBA Finance (Cardiff, UK)