Impact of Inflation on Real Estate of Pakistan

Pakistan's real estate business is under pressure from rising commodity prices and housing shortages. Second-quarter commodities prices rose, and inflation hit double digits. This price growth and a housing shortage have raised real estate prices. As global economic uncertainty lingers, the market should stay volatile.

Apex Group- Pakistan's one of the top real estate management companies- analyzes how different property investments might help keep up with inflation. The website lists rental, commercial, and land properties and covers mortgages and realtors. This information is helpful for real estate investors and anyone tracking market prices.

Causes of Inflation

IMF expects inflation to average 11.5% in developing nations and 7.5% in affluent ones this year. This global price growth is due to the rising cost of food, oil, housing, transportation, and other commodities and services. The IMF warns that too-large increases could cause economic instability.

Many people question why Pakistan's inflation is rising. BOP crisis is a major factor. The government has increased taxes and spending to combat this, and inflation is still growing.

The government recently increased the price of power and fuel to manage the balance of payments. This price hike has impacted various industries in the country. Inflation occurs when food, transportation, and housing prices rise faster than income.

How Inflation Affected Real Estate Market

Real estate is less affected by inflation than other sectors, and rising inflation has historically benefited real estate investors. If you buy a $100 home in 1955 and sell it for $200 in 2016, your actual gain is 20%. If you purchased the same property today with dollars worth only 0.5% of their original value (inflation has risen), your actual gain would be 5%. Inflation is significant for real estate investors.

Property appreciation

In 2018, a $1 million property may now be valued at $2 million or $3 million. Increasing housing demand is a major factor, and people want secure, high-return properties. Now may be the moment to buy property.

Increase in rents

Rental rates are rising because inflation is rising, and more people are looking for places to rent. The number of people who want to buy rental properties and those who can purchase rental properties has gone down.

Negative things that Inflation does to Real Estate

Here are some bad things that happen to real estate because of inflation.

Building costs are going up

Costs of all building materials are going up, which is terrible for the real estate market. The prices of these materials go up and down with inflation, making building costs go up over time. It hurts the real estate market because people cannot buy or rent homes.

Increasing cost of borrowing

Central banks around the world tend to increase interest rates when inflation rises. It hits the cost of borrowing, which further affects the cost of purchasing a home. The rise in interest rates also makes it more difficult for people to finance their real estate purchases.

Inflationary Real Estate Investments

Rental properties in an inflationary economy are a reliable real estate investment. Residential and commercial units are like stocks since they are less subject to market fluctuations and can deliver stable returns over time. Rental properties offer diversification because they can be invested in global markets.

In an inflationary atmosphere, it's hard to forecast if your property worth will rise. Apex Group can help with this. These investments spread your money across multiple homes, which reduces the risk of one failing. Property values may rise more as the economy grows.

For more information and safe investment options, contact Apex Group.