For investors, the best options for good profits have always been real estate and automobiles. Both industries have seen a substantial increase in prices and also have a steady demand which makes them a desirable option for businessmen and investors.
Why do people invest in either
Both the automobile and real estate industry have advantages and disadvantages and the preference of investors is different. You can easily buy and sell cars and usually can get a quick profit much easily than buying property and then finding a good buyer.
However, there are exceptions to the demand and profitability of either industry. Real estate is usually slower but it gives a much better and some experts can agree more reliable investment. Whereas buying and selling cars has slowly become an unreliable business due to the ever-increasing prices in the last few years with decreasing demand.
What is the current condition of either industry?
Currently, the automobile industry has seen an unprecedented increase in prices, and coupled with the high price of petrol, consumers are changing their preferences for automobiles which has decreased the amount of demand for cars.
You must have seen the latest news of a brand new honda civic being sold for more than 1 crore by owners. The trend of increasing the prices of cars every few months has finally reached its limit and consumers are no longer ready to buy cars in such quantities as before. Resultantly, this has caused a major decrease in car demand and sales of new cars.
Real estate industry on the other hand has slowly been getting better as more people shift to real estate buying for investment purposes. During the start of COVID-19 pandemic, the real estate market saw a decline in prices, and lots of losses were incurred by real estate agents with some even closing their offices permanently.
However, after some time it started to recover as people started to buy and sell properties in order to better their finances. And now in the later half of 2022 it has recovered with loads of projects in the pipeline with some nearly finished, showing the confidence of investors in the real estate market.
This improvement is seen, all across Pakistan, not just in the twin cities, with new projects in Karachi, Lahore, Multan and Bahawalpur
The trend of ever-increasing automobile prices in Pakistan
Ever since the dollar rate became unpredictable with an unforeseen decline in the rupee against dollar, the automobile industry in Pakistan has started to increase prices across the board for all vehicles.
The price increase is justified due to the usage of car parts exported from multiple countries which have to be paid in dollars. This led to an increase in car prices every few months and resultantly investors started buying cars in order to sell them for a quick profit in a few months.
The increased buying and the shortage of car parts and slow manufacturing processes led to a shortage of new cars in the market which led to even more increases in its price. However, this led to huge increases in price with a mid-range car price jumping to above 40 lakhs which is definitely not mid-range for the consumer.
The decline of investor confidence in automobiles
Finally now in 2022 with the dollar rate above 200 Rs and the car prices reaching unprecedented levels, consumers have started to sell a brand new honda civic for more than 1 crore rupees. These prices mean the consumer is no longer able to afford to buy a new car and thus because Pakistan’s middle class outnumbers the elite class by a huge amount the automobile industry has started to decline.
More people have started to buy motorcycles due to the increasing fuel prices. Now with car prices reaching above 1 crore, investors are not willing to invest such a huge amount on such an unpredictable investment that will not guarantee a profit.
If a consumer has 1 crore they would most likely want to invest in real estate as they will have a better chance for a large profit and they can also sell the property in case of emergency as there are more buyers for plots rather than automobiles.
Investors and the need for investment
The buyers of real estate usually buy for two main reasons. Either they buy a plot or house for their own use or for rent. The other reason is to invest either short-term (short-term profit) or long-term (expectance of bigger profit for more wait).
Thus the main reason for investors to buy a car was the expectation of a profit in the near future with little to no risk involved. However, with the shortage of new cars and the demand for cars decreasing the investors will no longer invest in automobiles as they have become risky as a form of investment.
That money that the investors have has to go somewhere, therefore the best investment choice is obviously real estate. So now all the money that investors will invest in real estate will lead to further bolstering its position as the best option for investment in Pakistan.
New real estate projects always launching
Investor confidence is also been increased in real estate due to the ever-increasing project being launched by different real estate companies. This not only allows for a large range of options for all types of consumers(cheaper options to more expensive options) but also allows for better competition between companies with more competitive prices and a better quality project to attract more people.
Every day we see new projects being launched, and these projects are from different investors and companies. This means all the major players are putting their money towards projects and we can argue that they are confident about good returns that’s why almost all of them are launching projects at the same time.
The automobile industry on the other hand has suffered greatly as car dealerships have slowly closed down due to a lack of profits. By comparing both industries we can clearly see the shift from the automobile industry.
Dubai-level living in Pakistan
Recently the increase in premium high-rise projects in Pakistan has also changed the real estate industry. These high rises have taken the concept of luxury living as seen in Dubai and brought it to Pakistan.
The apartment complex is designed to house all the amenities for its residents which has greatly increased the value of such projects and has bolstered investor confidence in such projects.
Due to the difference in scope of high-rise projects as compared to housing societies, investors are more confident to invest in these projects as they are able to easily finish the project in just a few years, and thus the ROI is much faster.
Over the years as the cost of living has increased, more and more people desire to live in apartments as they are much easier to manage than houses and they are more secure too. Luxury apartment living also has increased the desire to live such a life as seen in Dubai.
Therefore, as we see an increase in investor confidence in high-rise projects we also see more people’s desire to live in such a community free with great security and a clean and professional environment. For more on this topic click here put link of high rise article.
The amenities such as backup electricity, garbage disposal, and 24/7 security the standard of living is much better in high rises as compared to housing societies. This in turn means that people are gravitating towards apartments more as they are getting facilities on par or better than the top housing societies.
The positive side of foreign currency evaluation
Overseas Pakistanis are always looking to invest their earnings abroad here in Pakistan. Now with the increase in real estate projects all around Pakistan, they are spoilt for choice and thus they are investing even more according to their budget.
Luxury projects are an attractive investment for overseas Pakistanis as the standard of living promises the standard seen abroad with all the amenities. Therefore those Pakistanis who are looking for someplace to settle when they return are more likely to go for such projects.
The decline of the Pakistani rupee against foreign currency also has made Pakistan even more attractive for overseas investors as they can now invest in more expensive projects with the same amount of money.
Better awareness of buyers
The real estate industry in Pakistan has gone through quite a few shifts(from estate agents selling files of every new society, to selling less inventory but more reliable projects). The excess selling of property files which hadn’t been approved yet caused a lot of issues.
When all the major real estate agents and housing societies started selling files, everyone started the practice as it was leading to quick profits. This also led to the circulation of fake files which slowly deteriorated the positive effects and made buyers lose confidence in files.
Slowly but surely, people started seeing scams in real estate and the sales lessened overnight. However, this did lead to real estate companies choosing their inventory more carefully and making sure it is a reliable investment.
Therefore, the good aspect of this is the real estate market became even better with companies differentiating through selling NOC-approved inventory and making the investment more reliable for investors and buyers.
Now the real estate industry is facing a boom with loads of projects in the pipeline and most of them focus on being a reliable investment therefore investor confidence keeps getting better and this industry has become more trustworthy than the automobile industry.
The automobile industry has slowly gotten the perception from consumers that automobile companies are greedy and self-serving (due to the ever-increasing prices every few months), therefore we can see the decline in sales.
This has even led the oldest car manufacturer(and the most popular) in Pakistan, Toyota to announce that it is closing down manufacturing in Pakistan. This means that even investors are not banking on the automobile industry thus its decline is imminent.
Here the boom of the real estate industry versus the decline of the automobile industry speaks volumes about the future. Obviously, real estate is the winner here and it will continue to grow.
Real estate has always been the top choice for investment in Pakistan, and although we saw the automobile industry see a boost in increased investment for a short while, the increased market uncertainty finally caused it to collapse.
Now due to more projects and also more awareness of buyers, the real estate industry has started to change for the better. This has led to an increased boom in real estate projects along with more interest and consumers willing to invest more for a reliable deal.
Thus, the real estate industry as shown by investor confidence will keep on growing, while the automobile industry will need a major overhaul(better quality cars with competitive prices) in order to even start to recover. Therefore there is no question that the real estate market is the future.