Irrational Exuberance – Gambling on Pakistani property market

One thing si sure, this real estate rise in California is once a life time thing...although you never lose money holding real estate long term, you enver make this much either. this is insane.

Ali_1: see the problem with this hoping for a bubble to burst is that people has been waiting for it for last 10 years.....ask anyone in 1995 people thought house prices are too high even then. Stocks can be bought and sold quickly, homes can`t. People sometimes spend their whole life in one home.....there sure is a bubble, but it is made of cardboard if not aluminum...while stocks were made of moamajama:-)

Bottom line is prices has aprreciated so much in last 3/5 years that even if they go down by 20%...most people are not going to lose money unless you bought last weekend....and 20% is being very pessimistic, real estate never dips more than 10-15%...that too for couple of years to become stable or go back.

re condo: I came to rent a condo about 11 years ago. The rent was $1100/mo....the owner was an Indian. As we were making the deal his good side of heart over empowered the bania side and he said, I really want to sell this condo but since I could not right now I am renting it but if you want to buy it I can give you a good deal. It was 3 bd/2 bath condo and nice place but we in our reckless youth of naiveness decided that no we will buy a house 2 years down the line why buy a condo.

If I tell you the price of that condo in 1994 and today you will like to smack me in the head:

in 1994: price was $120,000 and he could have sold even lower if I pushed.
in 2001 a friend buought in same complex same condo for $290,000

Today the same condo is going for $500,000.

We did buy a house 2 years later but I deserve a thappaR for not buying that condo for 120K when we were paying more amount in rent than it would have costed us to buy.

#11: but knowing kulharee his friends don`t let him near their backyards.

Re: # 18

correction:

``But the buyer will be taking a chance if the price-tag does reflect teh reality. ``

should read

``But the buyer will be taking a chance if the price-tag does not reflect the reality. ``

Re: # 14

``I bought some land near Islamabad in March and the value is already more than doubled. Who gives an F if it is a bubble. I`ll sell it during my next trip and to hell with all you nay sayers!``

why don`t you hold on to it then.
many people did become millioniares during the dot.com but a lot many lost substantial amount. If you cash in during the upswing you will too benefit. But the buyer will be taking a chance if the price-tag does reflect teh reality.

``Like the saying goes, you always need a house to live in, unlike stocks. ``

but many buy it for investment too. Also for many stocks/401k are money for retirement.

Re: # 14

Ali, if you sell your land in Islamabad even at a 400 % profit and can only buy a used condom with that money, what good would it do? If everything else is going up along with real estate value, what good is it?

good article. reminds me of ``random walk down the wall street``

It is a well researched article, however, I do not think that the reason for high prices for real estate in Pakistan is much of an enigma. There is a host of factors that have come into play:

1. The first reason is the returning of expatriate Muslims from North America and Europe to Pakistan in order to save themselves from persecution in the wake of 9/11. They have brought lots of money with them ( from Pak point of view); for example a guy who owned a US$ 100K house in North America, when brought that money with him instantly turned into Rs. 6 million. The first thing that these displaced people needed was a house for their families.

2. Almost whole of the top military brass in Pakistan is currently on CIA`s payroll and they get paid in US$s for the services rendered; Real estate business is a pretty straight forward rackette to launder that kind of money.

3. Every warlord and drug dealer and their private armies in Afghanistan is on CIA`s payroll. They would rather invest their payouts in Pakistan, where it is safe and grows, than in the hellhole of their own country. It is a practice that started in Zia era and continues to this day. One of the main reasons the real estate prices in Islamabad have gone bonkers.

4. The CIA in turn funds itself through promoting drug and weapons trade to Europe and Far East thru Paksitan. It is also a practice that started during Zia era and continues to this day. That is the reason that a parallel undocumented economy has emerged from Torkham and Landi Kotal straight to Karachi.

5. The payout by drugs, weapons, and gasoline smugglers only and only at Iran-Pakistan border is Rs. 10 million per day to Pakistani officials that go upto the Director General of Rangers. This would give you a hint into the volume of payout at Afghan-Pak border.

The point is very simple, thanks to military dictatorship, too many people now have vested interests in this parallel economy. Military is the biggest stakeholder in this whole sordid business. They would never relent the powers to the civilian representatives of the people who would be accountable to the very people. Military would never let the independent legislation to take place in this country. Thanks to them, now no one will be able to have a roof over their head either. I don`t think there ever will be a bursting of a dot.com like bubble ever in Pakistan due to market reasons.

Comparing the hot housing market to the dot com bubble is comparing apples to oranges. Like the saying goes, you always need a house to live in, unlike stocks.

You always come out +ive in real estate if you keep it for > 7 years. (In california at least)

During the 2001-2003 meltdown in the bayarea when literally several hundred thousand jobs were lost, the housing prices didn`t ``crash`` or in most cases even ``dip``, why? because people took cash advances on their credit cards to pay their monthly mortgages while they kept looking for jobs!

I bought some land near Islamabad in March and the value is already more than doubled. Who gives an F if it is a bubble. I`ll sell it during my next trip and to hell with all you nay sayers!

Dullay pai, you should`ve listened to your wife... the first condo that I bought in `97 (2+1.5) in Cupertino school distt. for 218K is worth 600K now. Do you think I`ll ever loose money on that?

Re: # 12
your assessment is wrong here, to assume that prices will not fall.
Majority of the single family home sales during last 2 years were speculative kind, either ``fix-er-upper or second homes or interest only or ARM loans``
all of the above classify it as speculation.

I can see a big downward trend coming leading to Democrat president by 2008.
Just like what happened when clinton became president.

#11 by Kulharee on September 27, 2005 1:01pm PT


I am so poor, I am considering pitching a tent in a friend’s backyard?


If you were in the US, you`d probably run afoul of some zoning law...so you`re poor and you can`t pitch your tent....

I am so poor, I am considering pitching a tent in a friend’s backyard?

It sucks to be poor.

#9 by delhiwala on September 27, 2005 12:42pm PT


Price has`nt fallen yet but wait another 6 months,


they have in the DC area...million $ houses are a poor gauge...people who have million $ homes were already paying a ton of money...they are probably well off and there is no pressure to lower the house price even if it doesn`t sell..in addition, million $$ homes are usually at a premium for location or other things(swimming pool)..There`s always going to be people who`ll upgrade to those houses...

I know of Boston market(west/south area) as I still follow it.
Last year in Oct there were 250 houses for sale under 1 mill and avg time was 30 days.
This month there are 750 houses for sale under 1 mill and avg time is 7 months.

Price has`nt fallen yet but wait another 6 months, people will freak out and start lwoering the price, not to mention the skyrocket property tax that will stay where it is.

yeah I see that already happening....particularly over a million dollar homes have slowed down....days on the market is going up like 25 or 30 days...unheard of last year...they used to sell same day or same week.

Re: # 3
Gull te tussey theek hi kehende ho.
I am in the same boat, I bought a house in Boston and lived in it for 6 months, sold it for a profit of $30,000. Now I am living in big apple, paying $1800 for rent waiting for bubble to burst.

Dullay, I think it will definitely see some correction, wait(I am not a wise man) but certainly sees the shift. There is no way property prices can go on increasing where incomes are going down. On the whole country is heading south as far as economy is concerned.
Wait for another 1-2 yrs. You will see defintely see correction, when the banks start foreclosing.