Economy, Business And Markets

Housing Market Expected to Boom in March 2016

Housing Market Expected to Boom in March 2016Housing Market Expected to Boom in March 2016

Housing is one of the most vital sectors of the economy. The sector ranks first in terms of market value, leaving other sectors in the dust and impacting the investment market in many ways. It claimed the largest share in Iran’s net investments last year (ended March 20), explains Iraj Moezi, the CEO of Housing Investment Company in an article written for the Financial Tribune’s sister newspaper Donya-e-Eqtesad.

It seems that the recession in the housing market over the past few months has led to a decreased dynamism in the sector as seen in the declining number of construction permits.

The consequences of a decline in construction activities would appear during the peak demand period, possibly creating a housing bubble characterized by a rapid increase in housing prices.

Given the current standing of the housing market and the materials and methods used, the simplest structures in urban areas need a 24-month construction period.

The downward trend in the number of buildings under construction and the number of construction permits issued over the past year is expected to cause a housing shortage over the next two years. This would in turn disturb the balance between the number of housing units and the households’ demands.

The national banking system is trying to empower various classes of society on their paths to home-ownership by increasing the lending limit in mortgage loans. While the move could help home buyers in small cities, in a large city like Tehran the average housing price far exceeds the 800-million-rial ($24,240 at market exchange rate) loan offered by banks.

A crucial factor that could significantly influence the housing market is the possible lifting of western sanctions imposed against Iran over its nuclear energy program.

Experts predict that the removal of sanctions would result in a 2% growth in the national economy on top of the previously predicted growth for the current Iranian year (started March 21). However, the full effect of sanctions’ removal would first be felt in other economic sectors, including trade, services and industries, before influencing the housing market.

As international firms will scramble to enter the Iranian market once the sanctions are lifted, real estate would be the first thing they need to invest in for conducting their future business activities.

Past experiences have shown that the housing market is attractive to Iranian expatriates willing to invest in their home country. Providing the means to facilitate their investments could help boost demand in the sector.

An increase in the number of construction projects and allocation of government funds–from either domestic or international revenues–toward infrastructure development would boost revenues and value-added generated in the sector. Nonetheless, the recent hike in fuel costs is sure to affect the final prices in the housing sector.

The prospective changes in the housing market suggest that the sector could experience a boom in the next Iranian year (to start March 20, 2016), making the market attractive for potential investors.