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Why Bahria Town Phase 8 Prices Are Spiraling Down?

It started from January 2013 that prices of bahria town phase 8 started to rise gradually, but the rise was slow and stable and it sustained till the mid of 2013. After Ramzan, investor started to buy heavily the files of phase 8, and prices started increasing abnormally.

The market was so fast and furious that prices were increasing daily in the month of September and October 2013. Investors were buying freely at higher prices as they knew other investors will buy it right away at a little higher price.

This abnormal hike went on until before the Moharram, when market got a little stagnant, and smart investors understood that things are coming to a halt then, so they got cautious about purchasing any more of the files.

So, November was the month which saw a sudden halt in blind purchases and market started to recede at the end of November and it is still spiraling down.

Investors are at a loss as to what has happened to the market as Bahria Town Prices were supposed to remain stable rather than reverse so badly.

We will discuss about a number of reasons that might have caused this reversal in prices.

Reasons for the Price Crash in Bahria Town Phase 8:

We have listed down a number of factors that might have caused the downfall in bahria town phase 8 prices.

Bahria Town Phase 8 Price Hike was Artificial:

It is said that the price hike which went on for a long time,i.e. about 3 months was abnormal and artificial. During this hike, only dealers were the major buyers, nobody from outside was much interested to buy in bahria town. There were many genuine buyer initially who were actually migrants from Karachi and KPK who left their houses due to security situation and they preferred Bahria Town Rawalpindi due to the safe and secure environment and lower prices as compared with Islamabad.

As the prices went too high within a short span of time, genuine buyers didn't prefer to buy in bahria town as it was beyond their reach or they thought it was not worth the price. Majority of allottees came in to sell their plots during the hike and they earned good profit too, but genuine buyers were reluctant to buy at this high price. So, as soon as the investors changed direction, prices couldn't sustain and started spiraling down.

Security Situation in The Country:

As the security situation in KPK and Karachi was very bad last year, there were thousands of people moving to Islamabad and Rawalpindi from Karachi and KPK. Many families from Karachi have found residence in Bahria Town Phase 8. After the security situation got somewhat better, migration was reduced and people felt safer staying in Karachi as well as KPK. This reduction in migration meant reduction in investment for Bahria Town Rawalpindi, so lower demand and higher supply of plots caused the prices reverse.

Launch of Business District Commercial:

During the rise of the market, bahria launched its business district commercials which came out at very high price and major dealers of bahria town picked up all plots from bahria town. The price of 5 marla was set at 4.50 crore rupees and price of 8 marla was set at 7.50 crore rupees. This was too much and only a few big investors could buy these commercials and they did but their expectations were not met as no genuine buyers thought it was worth buying at that price in phase 8. So, billions of rupees were stuck in these commercials which affected the purchase of big investors.

Launch of Bahria Enclave 2 Islamabad:

Another shock came when bahria town launched bahria enclave 2 islamabad project at very high price. Where 5 marla was issued at 45 lac, 10 marla at 95 lac and 1 kanal at 1.80 crore rupees. Dealers and big investors spent billions of rupees to book directly from bahria town and they expected that they will earn good profit but they miscalculated the purchasing power of general public. Prices were kept too high that genuine buyers didn't consider it as a viable option as same size Plots in Bahria Enclave 1 Islamabad could be purchased a lot cheaper. Therefore the money of investors was stuck here too and prices have gone negative for these plots now.

These losses affected the trust and purchasing power of investors and dealers of bahria town, therefore sale and purchase almost stopped in the market.

Bahria Town Karachi Registration Forms:

Karachi registration forms have much spoiled the normal tradings in the market. After the purchasing power of dealers reduced due to bad investments, they indulged in forms trading. After the residential project forms, some other forms for Bahria Town Community Towers came out in the market which were also traded at very high profit in the market.

Small Investors with low purchasing power started dealing primarily in Karachi Registration Forms. As it is a small investment and can be traded on daily basis with little margin, most of small dealers and investors indulged in it and still they are involved in forms trading that has badly affected the market of Plots in Bahria Town Phase 8.

Initially, those who had registered the forms earned millions but the purchasers of these forms are trading at low profit margins. They think there is nothing else to do in the market, therefore forms are the only cheap investment and by playing around with forms, they can earn some money for their expenses.

DHA Valley's Impact on Bahria Town Market:

DHA Valley Islamabad was another major blow to the market, which destroyed normal routine trading of the market. DHA valley files started rising in the mid of November and by the 25th of November, Prices of DHA Valley were at the peak. This was another abnormal rise, and majority of bahria town dealers got involved in buying and selling these files, this sudden demand pushed the prices of most of these dha valley files up by 400% within a short span of 7 to 10 days. Since it was an artificial rise, those who created this hype stopped purchasing files, and as a result, the market collapsed within 2 days and most of the dealers of bahria town couldn't sell their files which they had bought at the peak time.

Prices of dha valley have again reached the half of their peak value, and dealers have kept their dha valley files in lockers, waiting for the peak to come again so that they can get rid of their files, otherwise they have to bear heavy losses if they sell it now, and many have sold at loss.

The Conculsion:

After so many dead investments, majority of dealers do not have enough money as a backup to pay full amount for all the properties they have purchased on Biyana, or if they buy, they will be unable to do anything else in the market. Therefore, they are trying to sell at lower prices, even at some loss.

Present Situation:

A continuous downfall in prices is still going on which has shattered the confidence of external investors. Those who purchased at very good price a week ago are regretting today as prices are lower today as compared with those of last week, and there are so many prime location plots available in the market today but buyers are scarce.

When Will the Market Gain Stability:

It is very difficult to say when will the market become stable again. It requires some external investors to enter and decrease the bulk load of files piled in the cabinets of all dealers so that they can have some cash to further invest in other properties.

External investors are currently reluctant as they are watching the fall in prices closely, and they are waiting for the prices to come back to where they were before the peak time which may or may not happen.

It is expected that as soon as the Karachi Registration Forms Trading is over and DHA Valley reaches its peak this year, the prices in Bahria Town will start rising again as availability of cheaper options to investors is also holding them back from investing in Bahria Town.

This blog post was created on Friday, January 24th, 2014 and Filed Under Tags: , , , , , , , , , ,