House rent contributes most to inflation


House rent contributes most to inflation KARACHI: After increasing sharply over the preceding 12 months, house rent remained the largest contributor to year-on-year inflation in August, reported the State Bank of Pakistan (SBP) in the latest Inflation Monitor.

In its list of top 15 contributors to the Consumer Price Index (CPI) for August, the SBP put house rent way ahead of other 14 contributors.

A comparison of inflation in August with the CPI for the same month of the preceding year shows that the weighted contribution of house rent clocked up at 29.56 per cent. Cigarette, milk and education followed with weighted contributions of 10.8pc, 10.01pc and 8.72pc, respectively.

Housing has been a problem for decades. Successive governments have promised to resolve the issue, but it persists nonetheless.

Prime Minister Nawaz Sharif in his last two governments in the 1990s assured people that investments in housing and construction would change the dynamics of the economy, but he failed to walk the talk.

Other governments favoured investors, developers and builders instead of the poor and middle-class working families.

Market players colluded to scale up the prices of housing units to a level where they became beyond the reach of ordinary people. As a result, builders and developers kept increasing the prices of both plots and housing units at whim.

The shortage of housing was 7.5 million units in 2009, with a shortfall of 300,000 housing units adding every year. It sums up to a shortage of 9.6m units in 2016.

Recently, the government levied taxes on selling and buying properties, which brought transactions to a near halt, although the price level remained largely intact.

“The number of transactions of land, houses and apartments has gone down, but the prices are still high. They may come down eventually if the taxes that hurt speculators are not withdrawn,” said Akhtar Hameed, a builder and developer.

He said house rent is on the rise to match the cost of the property. He added that the price of a small house is about Rs10m while its rent is in the range of Rs12,000-Rs18,000 per month in Karachi. If this money is kept in a bank, the investor can get a much higher return.


Leave a Comment