Important Factors Affecting The Real Estate Market In 2023

Investing in real estate is a great way to grow your capital. For decades, it’s been a profitable investment option enabling people to generate good returns. Lately, real estate is gaining momentum for another reason. It can help safeguard income from inflation.

As the economic climate within Pakistan – across the globe – is changing, investors will need to have a long-term approach to buying real estate assets. That means they should be aware of factors affecting the real estate market.

If you want to learn how to make the right investments and protect your wealth, keep reading this blog. We’ll investigate various issues impacting the current real estate in Pakistan. We’ve got a lot of ground to cover, so let’s dive right in.

Factors Affecting the Real Estate Market in 2023

1. Growing Population

As the country’s population continues to grow at an annual rate of 1.9%, so too does the demand for Pakistan real estates. More residential and commercial properties will be needed for the growing population in the coming years.

2. Demographics of Pakistan

The word demographics refers to the information about the composition of a country’s population. This includes factors, such as age, race, gender, education, employment, income, population growth, etc.

Demographic information is very important in real estate. It provides generalized data about current homeowners and identifies potential customers and their preferences. It also highlights the types of properties that are high in demand and can even impact the prices of real estate properties in certain areas.

Shifts in demographics can impact the real estate market. For instance, more education allows people to get jobs with better salaries. Similarly, a quickly growing population indicates a need for more housing options. As children grow up and marry, they will move out from small properties to build a home for their own families.

3. Employment Opportunities

Everyone dreams of living a more comfortable life. More importantly, they want to ensure their children’s future is secure. For these reasons, many people plan to buy a house in Pakistan as soon as they can afford it.

And one of the factors that can help achieve this dream is a better-paying job. A higher income offers the capital they need to purchase a home, or even invest in multiple real estate projects. So if a country has plentiful employment opportunities, the population has more purchasing power to buy expensive things, such as property, cars, etc.

Over 75% of the population is employed in Pakistan. So there is a lot of hope for the 85.78 million people who make up our workforce. Furthermore, by focusing on education and workforce development technologies, more jobs will be available in the coming five years.

4. Pakistan’s Economy

In order to attract investors to the real estate market, the economy needs to be stable. Unfortunately, countries across the globe are facing an unprecedented economic crisis. So in this regard, Pakistan is not alone.

At the moment, the economic growth for FY23, which ends in June 2023, is 0.4%. However, according to the World Bank’s latest Pakistan Development Update, strong political ownership and the right external support can push the country’s economy into a better position. So the Pakistan real estate forecast is good as there are hopes that the economy will slowly recover in the coming years.

5. Government Policies

Government policies have a huge impact on the real estate sector. For instance, tax credits, subsidiaries, and deductions encourage real estate growth by making housing options more affordable. The current investment-friendly environment is encouraging locals and foreigners to invest in Pakistan real estate.

Similarly, governmental development policies that focus on improving city infrastructure (e.g., roads, highways, bridges, etc.) make properties more accessible and increase the demand for real estate. The recent rise in infrastructural development in cities like Lahore, Islamabad, and Karachi is creating the foundation for more real estate development in the country.

6. Urbanization

As the quality of life in developed cities improves, people from rural areas migrate to get a piece of the pie. This means cities have to expand to accommodate the growing urban population.

Over the past decades, the urban population of Pakistan has grown consistently as thousands of citizens search for better incomes, education, health care, etc. What’s more, natural disasters like floods and drought push more and more to the urban areas. Just last year, millions of people were displaced from their rural homes due to the floods. Needless to say, the demand for residential properties increased.

7. Trust in the Market

The real estate market has shown an impressive return on investments, so there is considerable confidence in the sector. One factor contributing to the growing trust in the Pakistani real estate sector is the increase in foreign investment.

Just a while back, the government introduced policies to encourage overseas Pakistanis to invest in the real estate market. For instance, they can buy property without obtaining a National Tax Number. And recently, the fluctuating dollar rate has made it more attractive for overseas Pakistanis to buy property back home.

8. Pakistan’s Budget

A country’s budget is one of the important factors affecting the real estate market that impacts the real estate sector. On February 15th, 2023, Pakistan’s Finance Minister Ishaq Dar presented a mini budget. The salient features concerning the real estate market include:

• Increase in Sales Tax: The sales tax on general items increased from 17% to 18%. This will make a difference in the cost of building materials.
• Increase in Coal Sales Tax: The sales tax on coal production increased to 18% or Pkr 700/ton, whichever is higher. This increases the cost of manufacturing bricks and cement.
• Increase in Federal Excise Duty (FED): FED on cement increased from Pkr 1.5/kg to Pkr 2.0/kg.

These changes will significantly increase the cost of construction, increasing the price of construction raw materials. Consumers will face higher property prices.

9. Inflation

The cost of living is skyrocketing around the world. Not surprisingly, Pakistan’s inflation rate spiked from 35.4% in March 2023 to 36.4% in April. This increase in prices of commodities and raw materials simply means more expensive properties.

As inflation rates increase, it is smarter to invest in real estate. The value of your savings (money sitting in the bank) will depreciate. However, if you invest in property, its value will increase. So the current inflationary situation is presenting the best opportunity for you to invest in real estate.

Final Thoughts

These are just a few factors affecting the real estate market at the moment. While it may seem that some aspects of real estate trends are constricting, the real estate market is still open for business.

People and investors are still purchasing high-quality properties from reputable developers like Chapal Builders. Partnering with experienced property builders ensures your hard-earned money is safe, and your property appreciates in value.