According to new data released by the Ministry of Roads and Urban Development, the home price to income ratio in Tehran increased from 13.8 in fiscal 2016-17 to 32.2 in 2020-21.
In other words, the value of homes was 32 times higher than the annual income of average households in the capital.
The concept of price-to-income ratio is used to measure the affordability of homes. When banks and financial institutions give home loans, they consider the price-to-income ratio to assess how affordable it is to the loan applicant. The price-to-income ratio is generally known as attainability. It is used especially to measure the long-term affordability of homes in a region.
The ratio is seen as a good parameter to determine the current affordability of homes in a region relative to how affordable it was historically. If the ratio rises it means that homes are becoming less affordable and when it is of the descending order it implies that homes are more affordable.
As the Persian-language newspaper Hamshari reported, if households in Tehran are able to save one third of their income (an impossibility in the current dire economic conditions), it would take almost a century (96.6 years) for them to buy and own a dwelling place.
According to the newspaper, a ratio of above 5 is tantamount to unfavorable condition in the housing sector while above 10 is a crisis.
In many countries the price-to-income ratio hovers around 5 or less.
The report attributes the unprecedented crisis in the housing sector to the fact that owning a home is often considered a capital asset – people invest for making a profit rather than being consumers.
Moreover, no reliable ways and means exist to identify speculative activities in Iran’s vastly chaotic housing market in which prices have climbed as never before, the newspaper noted.
At All Time High
The number of reported monthly home sales in Tehran has reached a 21-month high, the Central Bank of Iran’s new report on the capital’s real estate market shows.
According to the CBI, 10,490 homes were sold in Tehran in the second month of the current fiscal year (April 21-May 21), up 206.1% on the month before and 166.4% higher from the corresponding month the year before.
The bank concurred that home prices are at an all-time high. The average price of one square meter of a residential unit in the sprawling capital was 363.52 million rials ($1,139) in the month under review, 26.2% over and above the same month in the preceding year, when average prices stood at 287.97 million rials ($902).
Home prices in the capital increased 6.1% in the second month from 342.73 million rials ($1,074) in the first month of the current year.
During the month to May 21, homes built five years ago constituted the biggest proportion of the sales at 29.6% (or 3,100 deals), down by 6.1 percentage points on the same month last year.
The lost share was added to homes 11-15 years old and over 20 years. They accounted for 16.1% and 20.3% of total deals on the same month of last year’s 13.5% and 13%, respectively.
The distribution of dealt properties indicates that among Tehran’s 22 districts, District 5 had the biggest share of the total deals at 16% followed by District 10 at 10% and the upscale District 2 at 9.3%.
In sum, 10 districts (5, 10, 2, 4, 14, 7, 8, 1, 15 and 11) had the lion's share of the deals at 73.9%, with the remaining 12 districts showing 26.1% share.
Among Tehran's 22 districts, District 1 registered the highest average home price of 744.4 million rials ($2,333) per square meter. District 18 had the capital city's cheapest homes with an average per-square meter price of 183.6 million rials ($575). The numbers show an increase of 23.6% and 53.4% YOY.
Residential units with an average price range of 250 million rials ($783) to 300 million rials ($940) per square meter were the most sought in Tehran during the month under review, accounting for 15% of all deals. These were followed by homes priced at 200 million rials ($629) to 250 million rials per square meter at 14.2%. Homes costing 300 million rials to 350 million rials ($1,097) per square meter had a share of 11.6%.
Of the total deals, 58.8% were for homes cheaper than the average per-square meter price in the city (363.5 million rials or $1,139).
Smaller units with floor area of 50-60 square meters registered the highest number of sales -- 15.3% of the total deals.
Units with an area of 60-70 and 70-80 square meters ranked second and third with 15.1% and 11.5% share respectively. Homes with an area under 80 square meters had a 55.3% share of the total deals.
The data indicate that Tehran’s homes worth between 10 billion rials ($31,347) and 15 billion rials ($47,021) were in demand with 17.7% share of the total sales. These were followed by units with a price tag of between 15 billion rials and 20 billion rials ($62,695), as well as those priced at 20 billion rials to 25 billion rials ($78,369) with 12.2% and 10.7% share, respectively.
Collectively, homes under 25 billion rials had a 51.3% share of the total deals in Tehran during the second month of the current year that started in March.
