Real-estate market is in the grip of recession these days, as builders are not interested in starting new projects given the back-to-back rise in the prices of construction materials, wages, services and permits, Mohammad Mortezavi, the head of Iran Mass Builders Association, said in an article for the Persian daily Jahan-e Sanat. A translation of the text follows:
The decline in financial resources and banks’ reluctance to extend loans to the construction sector are a tangible reality. Even the provision of loans to the government-sponsored project, the National Housing Movement has come to a halt.
Bank Maskan, the state agent bank of the housing sector, occasionally injects some loans; other banks don’t. They neither offer loans to those active in the construction sector, nor do they supply working capital to other sectors.
The lackluster real-estate market [due to the decline in the number of home deals] on the one hand and the continuous increase in construction costs on the other hand have dampened the motivation for starting housing projects. Effective demand for all residential units and not just small units is also absent.
Instability in the value of national currency has also worsened the situation. At times, the local currency loses 10-15% of its value within a week and then the authorities promise to return the situation to normal, which often does not happen. As a result, the market faces a new shock.
There are conflicting estimates regarding the time needed for buying a home, which range from 70 to 120 years, that’s because the average housing price is evaluated differently. In my opinion, the waiting period is between 80 and 90 years. This is about five to six times a citizen in developed countries needs to wait to own a home
International agreements and treaties that the government should conclude so that the country could benefit from free trade and financial exchanges do not exist and there is no prospect of such agreements being finalized. We were at times hopeful regarding the removal of sanctions; at present, such a hope has been dashed.
All these facts warn us that macroeconomic indicators will not improve either. Measures are being taken in the construction sector. However, when there is no vision and the income gap widens by the day, people become less and less capable of meeting their daily needs.
Under the circumstances, the share of monthly, quarterly and annual housing expenses increases. All these are signs of a fall in the allure of the construction and real-estate markets.
The current conditions in the market are not favorable at all. We are seeing a decline in the number of construction projects. Home sales will not improve either.
A series of fundamental reforms, including changes in international relations, should be made. It is necessary to set the stage for the removal of sanctions and free economic exchanges. This freedom should lead to competitiveness in the construction industry.
At present, Iran is not self-sufficient in terms of supplying construction materials. There are many dependencies in the production of building materials, which cannot be resolved easily. The country might become self-sufficient in the supply of construction materials in the future, but not today.
Housing market prospects are not promising. Fundamental changes are vital. Income levels should also improve. There are conflicting estimates regarding the time needed for buying a home, which range from 70 to 120 years, that’s because the average housing price is evaluated differently. In my opinion, the waiting period is between 80 and 90 years. This is about five to six times a citizen in developed countries needs to wait to own a home. Such a period is extremely disappointing for both the investor and the buyer.
As long as macroeconomic variables are not addressed, we cannot create favorable conditions in the construction and real-estate markets.
