USD and Pakistan Real Estate

USD and Pakistan Real Estate

USD and Pakistan real estate enjoy a very complicated relationship. Although they are a very important factor especially for the expats, not much is available in terms of research. However, If you understand how they affect each other you can probably make a lot more money than you usually do. It is commonly understood that increase in USD price is directly responsible for the increase in property values. In 2018 when the dollar gained a 35% in record time, it was highly anticipated that real estate will grow aswell. It usually works as a hedge, however, it took almost 2 years and a global pandemic for real estate to cope up.

Today while property prices stand at roughly 30 to 50% higher than the year 2018, in terms of dollars the prices are similar to that of 2018. It is now time to find out if this correlation has existed in the past or not and how does it usually playoff.

Taking DHA Lahore as an exmaple let us have a look at the data we have :

USD – PKR exchange rate in 2005 -2007 = 60

2008 = 70

2009 – 2011= 80 to 85

2012 = 90

2013 to 2017 = 100 to 105

2018 = 121

2019 to 2021 = 155

For the purpose of this study we calculated average prices of DHA Lahore Phase 5, 6 and 7.

Year 2005 

1 x USD = 60 PKR

Avg price of DHA Lahore Phase 6 in 2005 =  8 Million  (USD 150,000)

Avg price of DHA Lahore Phase 7 in 2005 =  7 Million (USD 116,666 )

Year 2010

1 x USD = 80 PKR

Avg price of DHA Lahore Phase 5 in 2010 = 10.2  Million (USD 127,500 )

Avg price of DHA Lahore Phase 6 in 2010 = 6.6 Million (USD 82,500)

Avg price of DHA Lahore Phase 7 in 2010 = 4 Million (USD 50,000 )

Year 2013-2014

1 x USD = 100 PKR

Avg price of DHA Lahore Phase 5 in 2013 = 20 Million (USD 200,000)

Avg price of DHA Lahore Phase 6 in 2013 = 15 Million (USD 150,000)

Avg price of DHA Lahore Phase 7 in 2013 = 10 Mil (USD 100,000)

Year 2016

1 x USD = 105 PKR

Avg price of DHA Lahore Phase 5 in 2016= 29 Million (USD 276,190)

Avg price of DHA Lahore Phase 6 in 2016= 24 Million (USD 228,571)

Avg price of DHA Lahore Phase 7 in 2016 = 14.6 Million (USD 139,047)

Year 2019

1 x USD = 160 PKR

Avg price of DHA Lahore Phase 5 in 2019 = 35 Million (USD 218,000)

Avg price of DHA Lahore Phase 6 in 2019 = 28 Million (USD 175,000)

Avg price of DHA Lahore Phase 7 in 2019 = 13.7 Million (USD 85,625 )

Year 2021

1 x USD = 160 PKR

Avg price of DHA Lahore Phase 5 in 2021 = 40 Million (USD 250,000)

Avg price of DHA Lahore Phase 6 in 2021 = 36 Million (USD 225,000)

Avg price of DHA Lahore Phase 7 in 2021 = 22.7 Million ( USD 141,875 )

Summary

Looking at the data above it is clear that profits in USD vary depending on the cycle you look at. Holding your property for long periods of time is usually not a very profitable option. Smaller cycles with a stable USD- PKR time period is where property prices have really offered good returns.

It is also clear that an increase in USD – PKR rate does not affect the property prices in isolation. As an example during the period from 2006 to 2011 property prices were falling while USD – PKR rose from 60 to 80. However, the property prices do actually cover the gap.

USD and Pakistan Real Estate 2021

While the property market is booming in terms of PKR, it has hardly managed to gain the lost glory of the year 2016 in terms of USD. Rather in most areas it is still struggling such as Phase 5 which is lower in terms of USD from its 2016 high.

If you have invested dollars in Pakistan in the last 10 years and you have been consistent then no matter what happened you have made some money. Not as much as you thought you had or were made to believe.

This is exactly why rental generating real estate is the key to wealth creation. Plots are really not the way to go if you want to create real wealth in real estate. It is the drip feed effect of the rentals which make you become rich and not a piece of land which lays there for whole eternity.

The dilemma is that anyone who invested in Plots in 2019 or 2020 is now at least 30 to 40% wealthier. Whereas those who invested in plots back in 2015 or 16 or before that are now just breaking even.

On the other hand, all those who invested in rental properties during these times are enjoying their wealth growth regardless of the time frame.

Lesson learned?

When the dollar is up and property is down, it is time to buy plots. However, if you want to make money regardless of when you invest rental generating properties are the only evergreen solution.

Capt (Retd) Shahnawaz Yaqub Bhatti

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