Latest statistics show that the number of homes in Iran is about 5% lower than the number of households.
A significant number of housing units are in slum areas and need to be replaced, which highlight the need for boosting real-estate development; the longer this industry remains underdeveloped, the graver its shortage becomes. Therefore, the government’s goal of building one million housing units per year is a necessity.
These remarks were made by Nasser Zakeri, an economist, in an article for the Persian daily Shargh. A translation of the text follows:
However, the question that needs to be answered by those in charge is whether the housing problem in our economy is really to blame on the shortage of supply. Is undersupply the only cause of the rapid rise in housing prices?
The impact of shortage on price increases is undeniable but statistics tell us that the causes of the problem go beyond shortage; the approach toward ownership of homes is to blame.
The sudden increase in the number of tenants shows that speculative demand in the housing market has managed to control the market, driving real applicants out of the market.
The large number of empty homes indicates that homeowners’ only motivation is to make profit from a possible price increase in the future; that is justifiable given the special conditions of the country’s economy, the uncontrollable increase in money supply, uncertainty of the capital market and difficulties in the production sector. At present, housing has turned into the best possible asset to convert your money into.
Those who supply and demand housing behave differently from those who make investments in other markets; for example, real-estate developers do not feel the need to modernize their production method and reduce production costs by using new technology. They do not care about promoting productivity; they ignore the need to sell products fast because, unlike other producers, their profits do not come from production; they make money from “owning” the property.
The special economic conditions of the country have turned the housing market into an “unusual” market; the concepts of scarcity and excess in this market are different from those of other markets.
For the same reason, you can argue that the most effective policy to solve the housing problem is not to build more homes on the outskirts of cities. Firstly, the policymakers need to streamline and rearrange the housing market and the construction industry. Under the current circumstances, neither the supplier nor the customer is acting professionally. As a result, neither supply nor demand is real.
The first effect of rearrangement will lead to a change in the ownership of residential units. Many homeowners who have invested in real estates will exit the market. On the other hand, real-estate developers who aim to sell their units quickly will plan to produce more, as they take into account the purchasing power of applicants.
Recent indications suggest that government officials seem to have realized the importance of housing and the difficulties of tenants better; they are thinking about taking more effective measures than before. After taking a brief look at the macroeconomic variables of the country, you can say that neither the financial state of the government nor the special social conditions leave leeway for trial and error. Those in charge need to confer with experts and draw up a reform plan for the housing sector.
Overhauling the ownership approach and phasing out speculative demand from the housing market are necessary; the government should place it on top of its agenda.
CBI Report on Tehran’s Property Market
The number of monthly home sales in Tehran has reached a 21-month high, the Central Bank of Iran’s latest report on the capital city’s real-estate market shows.
According to CBI, a total of 10,490 homes were sold in Tehran during the second month of the current fiscal year (April 21-May 21), registering a 206.1% jump compared to the month before and a 166.4% rise compared with the corresponding month of the year before.
The report also shows prices are at an all-time high. The average price of each square meter of a residential property in Tehran stood at 363.52 million rials ($1,193) during the month under review, registering a 26.2% rise over the preceding year’s same month, when average prices stood at 287.97 million rials ($945).
Home prices in the capital city increased by 6.1% compared to 342.73 million rials ($1,125) in the first month of the current fiscal year.
During the month ending May 21, residential properties up to five years old constituted the biggest proportion of deals at 29.6% (or 3,100 deals), down by 6.1 percentage points compared with the same month of last year.
The lost share was added to homes with a lifespan of 11-15 years and over 20 years. They accounted for 16.1% and 20.3% of total deals compared with 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 grabbed the biggest share of total deals at 16%, which was followed by District 10 with a share of 10% as well as District 2 with a share of 9.3%.
All-in-all, 10 districts (5, 10, 2, 4, 14, 7, 8, 1, 15 and 11) grabbed the lion's share of deals at 73.9%, with the remaining 12 districts holding a 26.1% share.
Among Tehran's 22 districts, District 1 registered the highest average home price of 744.4 million rials ($2,444) per square meter. District 18 offered the capital city's cheapest homes with an average per-square meter price of 183.6 million rials ($602). The aforesaid figures show a respective increase of 23.6% and 53.4% YOY respectively.
Residential units with an average price range of 250 million rials ($821) to 300 million rials ($985) per square meter were the most popular in Tehran during the Iranian month under review, as they accounted for 15% of all deals. They were followed by units priced at 200 million rials ($656) to 250 million rials per square meter with a share of 14.2% and homes priced at 300 million rials to 350 million rials ($1,149) per square meter with a share of 11.6%.
From the total number of deals, 58.8% belonged to homes cheaper than the average per-square meter price of the city (i.e., 363.5 million rials or $1,193).
Residential units with a floor area of 50-60 square meters registered the highest number of sales, with a 15.3% share of total deals.
Units with an area of 60-70 and 70-80 square meters ranked second and third with a respective share of 15.1% and 11.5%. All-in-all, residential properties with an area of under 80 square meters had a 55.3% share of total deals.
The data indicate that Tehran’s homes worth between 10 billion rials ($32,840) and 15 billion rials ($49,261) were the most popular with a share of 17.7% from the total deals. These were followed by homes with a price tag of between 15 billion rials and 20 billion rials ($65,681), as well as those priced at 20 billion rials to 25 billion rials ($82,101) with a respective share of 12.2% and 10.7% of total deals.
Collectively, homes valued under 25 billion rials had a 51.3% share of total home deals in Tehran during the second month of the current year.
The central regulator also reported changes in tenancy prices in the capital city and across urban areas.
According to CBI, prices of rented residential units in Tehran and across urban areas increased by 46% and 50.6% respectively during the second fiscal month compared with the corresponding month of last year.
