Real Estate Market Falls in Islamabad and Lahore

The real estate market maintained a mixed trend as the commercial capital witnessed moderate growth in values, but major cities including Islamabad, Rawalpindi, and Lahore recorded a downward trend due to the slowdown in economic activities and the imposition of new taxes on properties, according to a research report by House Building Finance Corporation (HBFC).

The properties have been divided into three categories, including Small Properties (3 Marla to 7 Marla or 75 Square Yards to 175 Square Yard), Medium Properties (10 Marla to 15 Marla or 250 Square Yards to 375 Square Yards), and Large Properties (1 Kanal to 2 Kanal or 1000 Square Yard to 2000 Square Yard). Also, the prices fluctuate due to the areas and cities of properties.

The report highlighted the trends in the real estate market from 2012 to 2023. Real Estate in Karachi Small properties in Karachi experienced explosive growth from 2012 to 2014, peaking at 50 percent in 2014. After a brief decline in 2016, the market saw moderate but steady growth, with a resurgence in 2021-2022, showing growth rates of 4 percent and 14 percent, respectively, and accelerating to 18 percent growth in 2024.

Medium properties have followed a more volatile trajectory, with contractions in 2016 and 2020, but recent recovery led to 24 percent growth in 2024.

Large properties in Karachi showed mixed performance with periods of high growth and contractions, peaking at 69 percent growth in 2014, with steady growth of 11 percent in 2012, 15 percent in 2023, and an acceleration to 31 percent in 2024. Real Estate Market in Lahore Lahore’s property market showed varied performance across segments from 2012 to 2024. Small properties experienced high volatility, peaking at 81 percent growth in 2014 and maintaining double-digit growth in recent years, ending at 12 percent in 2024.

Medium properties demonstrated more consistent growth, with notable peaks of 61 percent in 2012 and 28 percent in 2016, stabilizing at 13 percent in 2024. Large properties saw significant fluctuations, reaching highs of 28 percent in 2014 and 2022, but unexpectedly declined by 7 percent in 2024.

This contrasting performance in 2024, with continued growth in small and medium segments but a downturn in large properties, suggests a shift in Lahore’s real estate dynamics, possibly reflecting changing investor preferences or economic factors affecting the luxury market. Real Estate in Islamabad

The market for small properties in Islamabad has fluctuated from 2012 to 2016, with significant growth in 2013 (12 percent) and 2015 (22 percent). However, the market faced a notable dip in 2017 and 2018, followed by a strong rebound in 2021 with 19 percent growth, continuing to 28 percent in 2023, and moderating to 8 percent growth in 2024. Islamabad’s medium property market fluctuated significantly from 2012 to 2024, starting with 44 percent growth, declining to 0 percent in 2018-2019, then recovering.

The market peaked again at 26 percent growth in 2023 before moderating to 11 percent in 2024, indicating cyclical trends. Large properties in Islamabad have had mixed results, with significant fluctuations, including an impressive 81 percent growth in 2016, followed by sharp declines and a negative growth of 23 percent in 2024, indicating significant market challenges. Real Estate in Rawalpindi Small properties in Rawalpindi experienced a remarkable surge of 207 percent in 2012, followed by 53 percent growth in 2013.

This was followed by more moderate growth from 2014 to 2019, with fluctuations between 2 percent and 11 percent annually. In 2024, a modest 5 percent growth indicated stable demand. Medium properties in Rawalpindi have followed a gradual and steady growth trajectory, gaining momentum in 2014 with a 74 percent increase.

Consistent growth has been observed in recent years, with a 31 percent increase in both 2022 and 2023, and 11 percent growth in 2024, suggesting increasing demand for medium-sized homes. Rawalpindi’s large property market experienced extreme volatility from 2012 to 2024. After a modest 10 percent growth in 2012, it surged dramatically to 111 percent in 2013, followed by 24 percent in 2014.

The market then cooled, facing slight contraction and stagnation from 2016 to 2018. A strong recovery began in 2020 with 37 percent growth, maintaining momentum through 2023. However, 2024 saw a sharp reversal with a 16 percent decline, highlighting the market’s unpredictable nature. At present, the real estate market in Pakistan has also been heavily impacted by recent economic challenges. The real estate market in Pakistan has also been heavily impacted by recent economic challenges.

High inflation rates, which averaged around 24 percent in FY24, have eroded purchasing power, particularly affecting demand in the mid to high-end property segments. Historically, Currency devaluation, with the Pakistani Rupee depreciating against major currencies, has made real estate an increasingly attractive option for overseas Pakistanis and foreign investors, potentially driving up prices in specific segments. However, this year rupee remains largely unchanged against other currencies which also impacted real estate prices.

Moreover, the State Bank of Pakistan’s policy rate increase to 22 percent in 2023 amid higher inflation has made mortgages more expensive, potentially slowing down market activity. Economic uncertainty has also contributed to cautious investor sentiment, with many adopting a ‘wait-and-see’ approach before making significant investments.