There may be an identifiable pre-election pattern - observed over the past few election years - in the case of Karachi equity market. But the relatively less formal real estate market has a different story to tell.
In the last three elections, the real estate market used to witness a pre-poll slide in the number of transactions, if not in prices, as investors thought best to adopt a wait-and-see strategy.
This time around, however, there has been a bull-run in real estate prices seen in upscale areas of Karachi (DHA and Clifton taken as a proxy). This is an exception, according to experienced brokers in the market.
Yet, while one may be tempted to think that theres something about the upcoming elections - new faces, hopes of change etc - that may be driving the recent upturn in real estate prices in Karachis high-end areas, market pundits believe the recent movement has little to do with the elections.
"The market follows a 7-10 year cycle," explained Muhammad Shafi Jakvani, CEO of Citi Associates. "After a fall witnessed close to 2005, the market started improving in 2010 and is on an increasing spree. This has nothing to do with any significant external factors, but is the markets own positive cyclic movement. Youll see a continuation of the trend till mid-2014," Jakvani prophesied.
Prices of properties had risen by as much as 60 percent, and in some cases, doubled over the past years. Experienced brokers expect a further 20-60 percent increase in prices by year-end, depending on the type of property being invested in.
But many also believe that the recent frenzy is due to investors taking advantage of the ill-documented nature of the industry (under-pricing of the transaction to be specific) for tax avoidance purposes, especially the ones whove bartered a deal with a hidden hand over the past five years.
"In a lot of property investments - in DHA Phase-VIII for instance - documented prices are much lower than the actual trade price. Also, housing projects in general do not have much emphasis on investors source of money, which offers plenty of grey scope in the market," said Khalid Lakhani, CEO of Rabico Leasing Investments Real Estate, while explaining the reasons behind the recent rise in real estate investments.
Other brokers seem to concede more with Jakvani, commenting the recent rise in prices to be a part of the markets cyclic movement, with elections merely coinciding with the trend.
As for the post-election scenario, brokers do not expect much change, if the past performance of the leading parties is anything to go by. As for the new entrants, they feel theres still a long way to go before any magnanimous change can take place.
Till then, a continuation of real estates upward journey is expected, with anticipations of a peak in 2014. Whatever the cause, thats reason enough for investors to ride the current wave the markets enjoying.
This is unless of course, the winning political party starts seeing real estate as the ideal point to kick off their reforms to increase tax and the tax base. The likes of Shabbar Zaidi and Qaisar Bengali have long been calling for tightening the grip on real estate gains and recording asset bases. If that happens the bonanza may end sooner than expected.