Lahore Real Estate Forum

Start NEW Topic Or Post Advertisment

                                                          
 
Back to Forum |

is market undervalued at the moment??,

(48897)
   Habib
Sunday, October 26, 2008 11:30 AM 
Reply: >
If you remember these vague formula you may not have difficulty in Judging price in speculative or Underpriced market , the best guide of realestate worth are Built houses in Populated areas, In 2001 to 2005 Boom the prices of houses in populated areas say Johar Town only doubled where as in cerain plots or files they increased 5x or even 6x.
The simple formulas are
1. Price of Flat should be equal to 10 to 12 Ys of "Stable rental" income of Flat.
2. Price of Solid house shoud be 20 ys renatal income of House.
3. Price of plot under development by Good developer like in Phase 7 should be 1/4 of price of average house in Populated area.
4. Price of plot among houses should not be more than 1/2 of House's price.
i did not comment on files as they may have many unforeseen/delaying problems so they should be dealt case to case.
Looking at these figures it looks the market is exactly at its right worth at the moment or slightly undervalued in certain areas. So sale and purchase may be slow but market is not severly undervalued
tzk replied on Sunday, October 26, 2008 12:37 PM 

may be if you consider conversion rate. Dollar is 80 compared to 60 a few mnoths ago. so for foreign buyers it is 25% cheaper just because of convesion rate
arsu replied on Sunday, October 26, 2008 12:41 PM 

Is there any formula to find out at what price a certain house should be rented out? Like an ordinary 5 marla plot costs around 1200000 lacs and construction cost is around 1800000. So how one can determine the monthly rent of this house?
Real Money replied on Sunday, October 26, 2008 01:18 PM 

Dear Arsu

According to he formula of Mr Habib rental yield of the house in Lahore is 5%

The prices you mentioned indicates that the cost of the house is
30 Lacs(12lacs+18lacs)

5% rental yield is 1.5lacs and so monthly rent should be at 12500

Pakistan have very low rental yields. There are countries with rental yields up to 15%

This means that you can generate rental income in some other countries up to 3 times what you can generate in Pakistan
Jameel replied on Sunday, October 26, 2008 04:19 PM 

These are all gross Calculations, and can help you only if you are grossly Wrong, But It cant help you to get exact worth of Certain Plot or property.
If you are intrested to buy some patrcular Property then you will ahve to use other methods,
Guest101 replied on Sunday, October 26, 2008 07:50 PM 

There is literally too much supply and options for property now. A mircale can increase the prices now before at least 5 years.
just curious replied on Sunday, October 26, 2008 08:47 PM 

Dear Real Money,

Are you talking about residential rents or commercial? I recall one or two post by Aamir sahab in which the yield was 15% in Islamabad.
Real Money replied on Monday, October 27, 2008 06:33 AM 

Dear Jameel
We are all here to learn for each other. We know that more accurate will be survey and there is no substitute to survey. However if do you have any other methods than please share. Thanks

Dear just curious

If there is a property in islam abad with rental yield of 15 % than it is a great news. Please confirm it and let us know the details
Habib replied on Monday, October 27, 2008 07:19 AM 

I mentioned these these facts only for Rough estimation, And these Formulae are For pakistan, Not For other Countries, In other countries rental income can be more.
In UAE where I am living the retal market is very artificial, The Rents go up and down based on expatriate population trends, In 80 Rents were very high then in late 90s Rents were 1/2 and Now again they are double, The owner having house rent in of 100000 Dhs in 1987 cant imagine that his Flat's rent can be 50000 in 1997, [in pakistan he would be expecting at least Double in 10 ys], Govt have ceratin policies to protect the benefits of property owners, like Govt Companies are "not allowed to pay cash" to the employees, And if they entitle you for 100K rent you cant get benefit, if you rent house on 60K, In early 2000s there used to be "strange bargain", One of my friend was entiled for 100K rent when he approached an apartment owner asked 80K, When he realized that persons limit is 100K, He said OK I shall give you New 16 Cubic feet Fridge, If you sign contract at 100K.
Similarly in US most of westeners dont like to buy the houses, they have habit of switching Jobs very often, and usually they continue switching, many have no Children or Dont stick to one Place for children education. For them there is no use to buy houses, Plus they also get Tax refund on rets, So they dont mind Paying more trents, Recently my friend came from US he said he is expecting some 9% annual rent of his $300K house.
arsu replied on Monday, October 27, 2008 02:27 PM 

Habib can one expect that present rents would also sometime come down like it did in the past, as you said in late 90's they became almost half of what they used to be in 80's.Talking about UAE only.
Nazir replied on Monday, October 27, 2008 02:57 PM 

"Recently my friend came from US he said he is expecting some 9% annual rent of his $300K house."

One clarification, Rent 9% on 300k is correct but there is a tax of 3.5% on 300K as real estate tax, 1% Home insurance etc which owner pay so you need to subtract them and it will be % = 4.5 % annual yield....

Second there is no tax refund on renting, actually it is opposite, all tax refunds are on home ownership.
Habib replied on Tuesday, October 28, 2008 05:58 AM 

Dear Arsu, it is long subject But i think these rents will not come down in abu Dhabi in Short term may be in 5 ys they will stablize, as they have many "Govt Jobs" The only thing can decrease the rents in Abu Dhabi if employer pays cash and People start healthy bargain as people have to pay from pocket.
Where as in 5 ys time Dubai rents should be about 60% of current level. 50% of Population in Duabi which you see on roads are people related to Construction, Dont take into account only Labour or Civil engineer, there are 50 related professions. From health care to airline tickets.I give you an example i know a person who works in Big Insurance Co in Dubai, they insure every thing from houses to Cars but he was telling 90% of their Business at present in to insure Construction machinery like cranes etc, Dubai cant contine buliding at same pace for long time process has to halt in 5 ys time, when you will see about 30% people will leave Dubai and about 30% houses additional supply will there in 5 ys time.
>