Within the property boom lies an opportunity for Pakistan
ONE of the main features of any economy, or more correctly its health, is the state of its property market. In a way this points, very accurately, to its short-term prospects, as it does indicate, in a vague way, its medium-term hopes. In no way does it point to any long-term possibility.
The best way to understand the property market is to study price trends in any given submarket. Let us have a look at how Pakistan is faring, as are the immediate neighbours, and try to see signs of some long-term hope. We see in Lahore, as well as in Karachi and Islamabad, that property prices have almost doubled in the last five years. We also see that property prices in Karachi are growing fastest. Why is this happening when businesses are not faring well and banks are not lending to businesses?
As can be expected Pakistan is the world's surprise package just as its cricket team, on its day, can thrash any team in the world. But then serious business invests are no game, for they follow predictable trends and developments. So to understand the property market let us have a quick look at the main economic development of the last one year. That development is falling oil prices. What has that meant for our economy, our peace, and our very way of life?
Falling oil prices has meant that the main beneficiary of high oil prices was Saudi Arabia, through its US-owned oil facilities. Its main competitor in the world oil markets was Iran, Iraq, Libya and the South American belt of oil producers.
What happened in real terms? We saw that while the sole superpower, the USA, backed the Saudis and very effectively through military and political platforms, blocked out Iran and the South American duo, and physically clobbered Iraq and Libya by killing its dictators and dividing their supporters into religious fanatical groups. The front face of this effort was the 'Threat from Islam'.
But who really was financing this ' Islamic' threat? Naturally, all of us know that it were the Saudis. So how to now put them in their place? Create conditions whereby oil prices could collapse even if it meant a world recession, and that would mean that the USA would, at some point, restart its falling war industry. The ' guns and butter' debate has started in the West again and it seems very soon we might see trouble.
But then just ask yourself how 'does all this impact the Pakistani property market'? The answer is that the first to suffer would be the Arabian Peninsula country.
The Dubai, Abu Dhabi and Saudi property markets have started to fall, and as Pakistanis were the largest investors in these property markets, mostly with illegal money, they started to sell. Mind you now finding a buyer for property in these nearby Arabian Peninsula is becoming nearly impossible. Residents reports dozens of virtually empty building with no one willing to invest.
So what do these Pakistanis now do? They start investing in their own country, and as they are not of a trading and manufacturing mind set the only way out is to buy property.
So we see property prices over the last two years increasing in Karachi by 1020 per cent, Lahore by 68 per cent and, I am not surprised, Islamabad by 105 per cent. This means that the Karachi mafia and the Islamabad official mafia are investing most in their own cities. There is a logic to this investment.