Economy, Business And Markets

Price of Low-Cost Housing Expected to Rise

Price of Low-Cost Housing Expected to RisePrice of Low-Cost Housing Expected to Rise

Despite sustained recession in the housing market, the demand for houses by the low and middle income groups is expected to increase the prices of these houses in the next Iranian year (starting March 21), as anticipated by economic expert Jamshid Pazhuyan.

“The price of low-cost houses is expected to experience a sharper increase compared to luxury apartments regardless of the recession in the market,” Pazhuyan noted.

Iranian households’ tendency to view houses as an investment, rather than only for residential purposes, leads to a continuous demand for housing. As the financial institutions are incapable of responding to the growing demand proportionately, an imbalance is looming large in the housing market, he added.

Comparing Iran’s housing policies with other countries, he said: “In the US, another place where real state is viewed as an investment property, people can take advantage of long term loans covering more than 90% of the house’s total price without any advance payment. Therefore, the housing market remains in an equilibrium even during sudden price fluctuations.”

He observed that in countries such as the US, where houses are primarily financed through bank loans, prices decline during recession periods as buyers sell their houses at low prices to repay loans; whereas, “no significant price depreciation takes place in Iran during recession, as home owners are not burdened with huge debts to the banks.”

He also noted that Maskan Bank, the bank in charge of providing housing loans in Iran, provides loans comparable with the loans offered by other banks, which is not sufficient to solve the housing problem.

Regarding the Construction Fund – a unit investment trust launched by the ministry of economic affairs and finance last year to offer exchange-tradable housing stocks to people and companies – he noted that implementing the scheme is impractical since per square meter prices depend on many parameters such as the location and the floor it is on. “Therefore, trading housing stocks in bourse is not an effective policy to regulate the housing market.