The housing market has suffered enormously from the consequences of misguided policies in recent years, Gholamreza Salami, a housing expert, said in an article for the Persian economic daily Donya-e-Eqtesad.
A translation of the article follows:
Poor policymaking in this market has led to capital flight and dire housing conditions for households.
Frequent increases in home prices, an eightfold increase in exchange rate and the 40% inflation of recent years led to a significant rise in rents.
Decision-makers employed measures that limit the leeway for private sector real-estate developers to expand their business instead of encouraging them to invest more in the market.
Statistics show that the total number of housing permits issued in Tehran in the fiscal 2020-21 was almost equal to that of the fiscal 1998-99, i.e., 7,000 permits compared with more than 26,000 in the fiscal 2001-02. The effects of real-estate developers’ reluctance to construct housing in large cities will become apparent in the coming years in the form of a severe shortage.
Pursuing the approach of mandatory rent increase ceiling or mandatory extension of lease agreements will, in effect, act to the detriment of tenants in the form of shortage. Over the past two years, most of the housing units purchased in the market were traded by speculative investors who were reluctant to supply these units to the rental market; the government’s command policies and mistakes contributed to the housing shortage.
What is certain is that the impact of wrong policies in the housing market may be as strong as those of external variables.
The government is advised to countermand these deviant policies and take the right path to support supply and investment of private sector in the housing market. Instead of applying restrictive policies in this sector, the government needs to facilitate investment.
