According to Isna, the inflation of the housing market has reached less than one third of the inflation rate of other goods. This June, the growth rate of housing prices in Tehran was 9.7%, while the annual general inflation was 35.5% and point-to-point inflation was 31.6%. In this report, the reasons for the current stagnation of the housing market in Iran and the prediction of the possible time of its prosperity are discussed.
The reasons for the stagnation of the housing market in Iran
Decrease in people’s purchasing power
One of the main reasons for the stagnation of the housing market in Iran is the decrease in people’s purchasing power due to high inflation and the devaluation of the national currency. The increase in housing prices in recent years has been such that many households cannot afford to buy or even rent a suitable residential unit. On the other hand, the increase in the inflation rate has reduced the value of people’s savings and has limited the possibility of prepayment for housing purchases. For this reason, most of the applicants look for advertisements with the title “Kelid” and “Devar” on real estate sites Urgent sale of an apartment below the price in Tehran are
High rate of bank facilities
The high interest rate of housing facilities is another effective factor in the market recession. Banks are not able to provide mortgage loans with suitable conditions due to limited monetary policies. The loans that are offered are also usually of a low amount and are not able to cover the costs of purchasing a residential unit. This makes potential buyers discouraged from entering the housing market. For example for Buying a house in Tehran With an average housing price of 90 million tomans, a mortgage covers a quarter of the cost of buying a 50-meter apartment in the middle area of Tehran. In other cities the situation is a little better, for Buying a house in Isfahan With the average housing price per square meter of 40 million tomans, Housing loan One third covers the cost of buying a 60-meter apartment
Imbalance of supply and demand
In recent years, the focus of housing developers on building luxury and expensive housing has led to an imbalance in the market. Many of these units remain without buyers, while the market’s main need is for affordable housing units. Applicants are not able to pay for the purchase of these units, and the manufacturers are not willing to pay at a lower price than the cost price. This imbalance in supply and demand has exacerbated the recession.
Economic instability and uncertainty
Economic instability and uncertainty about the future is another key factor in housing market stagnation. Extreme fluctuations in exchange rates and economic policies have caused investors and buyers to refrain from entering the housing market. This volatility is especially a deterrent for investors looking for short-term gains.
Unsuccessful government policies
Government programs in the field of housing, including projects such as Mehr Housing and National Housing, have not been able to fully solve the market problems. Many of these plans have failed due to weak implementation and lack of financial resources. Also, control policies such as increasing the tax on housing transactions have not been able to have a positive effect on the market and have sometimes even led to a decrease in transactions.
Reducing the desire to invest in housing
Investing in the housing market, which was one of the safe and profitable options in the past, has decreased due to the decrease in returns compared to other markets such as currency, gold, and the stock market. Many investors prefer to transfer their capital to markets with higher liquidity and less risk.
Migration and change of lifestyle
The increasing trend of immigration abroad and the change in people’s life patterns have also affected the stagnation of the housing market. The decrease in the active population in the housing market and the change in residential needs have reduced the demand for buying a house.
Consequences of housing market recession
A recession in the housing market has negative consequences not only for buyers and sellers, but also for the entire country’s economy. Decrease in housing transactions leads to decrease in income of builders, construction workers and related industries. Also, stagnation in this sector can reduce the economic growth of the country and increase the unemployment rate.
When will the housing market boom?
Forecasting the boom time of the housing market in Iran depends on various factors. In the following, we point out the most important prerequisites for market prosperity:
Improving people’s purchasing power
The first and most important condition for the prosperity of the housing market is to increase the purchasing power of the people. This is only possible through reducing inflation, increasing incomes and providing appropriate banking facilities. The government should implement policies that will reduce economic pressures on people and increase access to housing loans.
Reducing the interest rate of bank facilities
Another key factor is the reduction in the interest rate of bank facilities. Offering loans with lower interest rates and longer repayment terms can encourage buyers to enter the market.
Economic stability
Economic stability and reduction of fluctuations in the currency market and macroeconomic policies are among the other prerequisites for the housing market boom. When builders, investors and buyers feel economic security, the housing market will thrive.
Modify supply and demand policies
In order for the market to prosper, the focus should be on the production of housing at a reasonable price and in accordance with the needs of the society. The government can increase the production of affordable housing by providing tax incentives to builders.
Attracting domestic and foreign investment
Attracting domestic and foreign investment in the housing sector can have a significant effect on the prosperity of this market. For this, protective laws and financial incentives for investors should be established and rules for investors’ entry into the housing market should be facilitated.
Solving the problem of empty houses
Many vacant homes, mostly in the luxury segment of the market, can be brought onto the market by policies such as the Vacant Home Tax. This can improve the balance of supply and demand to some extent.
Reducing construction costs
By reducing construction costs by providing subsidies or facilities to builders, the final price of housing can be reduced and demand increased.
conclusion
The stagnation of the housing market in Iran is the result of a combination of economic, social and political factors that have affected supply and demand. In order to get out of this recession and bring prosperity back to the market, it is necessary for the government and the private sector to coordinate actions that include increasing people’s purchasing power, reforming banking policies and attracting new investments.
Considering the current conditions, it is predicted that in the case of implementing appropriate policies and improving the economic conditions, the housing market will witness relative prosperity in the next few years. However, achieving sustainable prosperity requires long-term planning and structural measures.
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