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Causes For Housing Shortage & Its Effects


An investment in real estate goes a long way and it is believed that it always appreciates unless there is a real estate crisis or political instability. As an investor, one must keep tabs on the market condition, demand and supply of real estate and buying power of the other investors and buyers in order to get a better return on investment. According to the State Bank of Pakistan, Pakistan faces a shortage of 700,000 housing units annually and only half of the demand is being met. Such housing shortfalls can occur in any country due to various reasons. In this blog, we have pointed out a few causes of housing shortage and its long-term effects.

Causes Of Housing Shortage

vertical developments
Developing vertical projects is an efficient use of land

Before we explore the reasons behind housing shortage, we first need to understand what it actually means.

A housing shortage means a lack or deficiency of available housing units to accommodate people of an area. When the supply of the housing projects is less and demand is higher, it creates an imbalance in the market leading to the housing deficit in a country. The market is considered in a state of equilibrium if there are only four to six months of supply of housing units and no new projects are coming. 

If supply is better than demand, it is considered a “buyer’s market,” where buyers are calling the shots and if demand is higher than supply, sellers call the shots and it is called a seller’s market. A smart investor buys when the market is slow and supply is higher and sells when supply decreases and the value of a property increases.

We now know that shortage of housing units is caused by the unavailability of enough residential projects and units in the market but what triggers that? Why does the development of new projects stop? Following are some of the reasons which will help you understand it.

  • Increased cost of construction
  • Scarcity of land in cities
  • Migration to metropolises
  • Lack of low-cost housing
  • Population growth

Increased Cost Of Construction

There are numerous small industries that are associated with construction and building. Most people only consider land, buying bags of cement and steel are the major costs in construction. However, there are a lot of other costs too that are involved. Finishing and cost of labour accumulate to become a huge portion of the total costs. When the cost of construction increases, profit margins of builders and developers decrease which is why an increase in prices of built units is anticipated by buyers.

Similarly, if a person is building a home for the purpose of living there, the cost of construction directly affects their budget which is why many don’t even begin to build. Unless there is a subsidy provided by the government on construction materials, it is extremely difficult for a common man to build a home.

cost of construction
The increased cost of construction is a hindrance in development of new projects

Scarcity Of Land In Cities

There can only be enough space in any city to develop new residential projects. While builders and developers are now developing peri-urban housing societies which are on the outskirts of cities, most people still prefer to live within cities from where they have close access to work, schools and medical facilities. Land for new developments within a city is becoming scarce while the demand for residential projects is constantly increasing.

Another important point because of which shortage of housing units is being caused is an inefficient use of land. Vertical residential projects are the most efficient use of land where more can be achieved with fewer resources. This not only saves the additional cost of land but also increases the number of units produced.

Migration To Metropolises

Bigger cities are known to have more and better facilities for education, health and career growth which is why people from smaller cities and towns move. Most of the time it is only one person moving so they rent a small apartment or a room but the eventual plan is to move all the family with them. The process of migration increases the population and demand for residential units and becomes a major cause of housing shortage in a city.

The impact of migration is only on cities where people are moving for better facilities and opportunities. It hardly impacts nearby areas but creates an extra unit available in another city or town. This is the reason why the problem of shortage of houses is usually in bigger cities and even with continuous supply, the demand is not being met.

Lack Of Low-cost Housing

Housing is a basic need and just like food and water, it is also important for the growth and survival of humans. The increased demand for houses due to other factors leads to the development of slums, homelessness, higher property prices and unhygienic ghettos and slums. The higher the price, the more difficult it becomes for people to afford renting a place is the only option to stay in a city.

Development of low-cost housing units within the city, on government land or in peri-urban schemes is the best solution to minimize the gap. These schemes are usually launched by governments to subsidize housing and make home financing within the reach of low-income people and offer them a chance to build a home of their own. Again, these low-cost housing units can only be effective if they are well planned, save space and provide quality.

low-cost residential projects
Low-cost housing projects is one of the solutions to meet housing demand

Population Growth

The world population is growing exponentially and efficient usage of resources is the only way forward. This also applies to the construction and housing industry because, in the next few years, there will be more people searching for residential units. Most affected parts of the countries due to growth in population are big cities because that is where facilities and opportunities are perceived to be present.

These causes cannot be neutralized in a single day or by a single blow. These are part of the chain reaction and can be handled with time, change of policies and taking other measures. Low-cost housing such as the Naya Pakistan Housing Programme and the development of peri-urban societies at easy instalment plans can be launched by the government and through public-private partnerships. Moreover, instead of building huge and luxury residences, the focus should be switched to small, quality and efficient constructions.

Moreover, living in rural areas needs to be made more attractive by providing facilities, jobs and other opportunities. This will take some burden off bigger cities and encourage expanding smaller cities.

If you are looking for such projects which offer quality and vertical living experience, head over to Zameen Blog now where you will find a huge list of apartments and peri-urban gated communities.


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