Numerous aspects of one's socioeconomic well-being are unknown due to the nation's current political and economic unrest. Inflation and unemployment are realities in these times of global crisis, yet this raises many issues about future financial stability.
The majority of Pakistanis choose to invest in real estate, and the industry's forecasts have turned into a major source of economic anxiety for many investors. Below is a collection of questions that Sapphire Properties specialists have responded to regarding future predictions, industry estimates, dos and don'ts, and other related topics.
What Is Expected to Happen to Property Prices on A Whole In 2022?
In Pakistan, the growth rate for older properties hovers about 12%. We anticipate the properties to perform within a range of more than 15.75% of the upper standard deviation this year. This might be attributable to a number of macroeconomic factors, including rising inflation rates, inflated demand, and supportive governmental real estate policy.
The value growth might reach 25% in some high-growing and demand regions. We predict that the present bullish trend will also result in stronger growth rates for the next year, raising the values by an additional 15% or more. Due to political unpredictability, market growth is anticipated to slow down near the end of the year.
Is It Time to Sell Right Now?
Exiting the asset market is never a smart move. Even in difficult economic situations, asset markets often have longer-term growth rates that are greater than inflation rates, making them a great hedge against inflation. Only withdraw funds from the asset markets to adjust your risk appetite, purchase a better asset, or reduce your leverage ratio. A benefit of less than that is not alluring enough given that the average transaction cost in the real estate asset market is over 6%.
Since Pakistani real estate is expanding more quickly, selling now would result in lower returns in terms of fiat money due to the country's high levels of inflation and money supply. At the very least, riding this wave of rapid development is the better course of action; holding it is the best course of action.
What Happens If You Have Several Properties?
The core principles of real estate investment are diversification and portfolio management. Your risk tolerance determines your portfolio on the efficient investing frontier. If you own numerous properties, switch to the less risky options in the second part of this year, even if it results in lower returns.
Like the stock market, real estate is different. Real estate has a greater transaction cost. If you sell one property and acquire another, your total transaction expenses will increase by two times. Additionally, it's crucial that you keep onto homes with superior appreciation prospects.
How Important Is Geography?
Despite being commonly misunderstood, location is an important aspect of real estate. It refers to more than just the physical position and visibility; it also takes into account macroeconomic, macro cultural, and demographic aspects. The location characteristics that have the most effects on property values are as follows:
· Anticipated Supply
· The amenities that are nearby
· Trends in population growth rate
· The area's general demographics
· upcoming developments
When buying real estate, consider both what has a prime position now and what will inevitably become more important in the future.
How Can Real Estate Successfully Assist a Person, A Couple, Or A Family in Creating Generational Wealth Today?
Over time, generational wealth is accrued. When making a purchase, consider the price and value disparity. Value is what you get, while price is what you spend. In the long term, a property with a value greater than its present price will always provide superior outcomes. Profits are earned during the buying phase of investment, and they are only realized during the selling phase.
Look for properties with higher net operational income and positive cash flow month over month in addition to those that provide better value for the money. In Pakistan, a growth rate of 12% on average together with an annual ROI of 5% or above would compound into a significant wealth accumulator over a few decades.
Financial freedom over extended periods of time is typically the goal of generational wealth. Having a positive cash flow that results in your passive income exceeding your costs and liabilities pay-outs is a great approach to achieve this through real estate investments.
The Last Word
Regarding the socio-political climate in Pakistan and the state of the international economy, 2022 has been nothing short of an emotional roller coaster. Selling your real estate asset could be alluring given the high inflation rates and inflated demand, but the rewards would be minimal owing to these factors. If you play your cards correctly, owning real estate in Pakistan over the long term can even help you achieve financial freedom and generational riches. It is a fantastic hedge against inflation.