Within the prop­erty boom lies an op­por­tu­nity for Pak­istan

The Pak Banker - - FRONT PAGE - Rahim Sheikh

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.

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