Economy, Business And Markets

Housing Market Recession Lingers On

Housing Market Recession Lingers On
Housing Market Recession Lingers On

In Iran, demand for housing is always more than supply, resulting in boom and bust cycles in housing prices, Hadi Nazarpour, a housing sector expert, told ISNA.

He said as the housing bubble often does not grow at the same rate as inflation, it leads to 2-3 times increase in the housing prices, ultimately leading to recession.

The expert called on the government to study factors contributing to the formation of housing bubbles and establish a mechanism to prevent them.

Nazarpour observed that many people in Iran resort to renting due to unreasonably high prices, which in turn results in rent increases.

He said one way to overcome the recession in the housing market is to give loans to help people buy homes in proportion to their earnings.

“Many countries in Europe are experiencing a negative population growth and low demand. Therefore, the European banks grant loans of up to 80% of the value of homes,” Nazarpour said.

For the second consecutive year, the housing market has been plagued by slowdown and many builders or property owners can hardly find buyers for their real estate.

The sharp slowdown in the housing sector over the past two years has negatively affected the construction sector. Official data provided by the Statistical Center of Iran indicate that Tehran Municipality issued 50.5% less construction permits in the first quarter of the previous Iranian year (March 21-June 21, 2014) compared with the similar period of a year earlier.

Housing prices increased by 220% from June 2005, when former president Mahmoud Ahmadinejad first took office till June 2013. The cost of renting an average flat in urban areas rose by 254% during the same period. This is while land prices in urban areas grew by 81% during the period.

Experts believe such unreasonable prices make owning a house an impossible dream for the average households relying on mortgage loans, which on average cover only by 25% of the price of a small apartment in a middle-class neighborhood of Tehran.

However, officials predict that the housing market will experience a gradual boom by the end of the current Iranian year (March 19, 2016). Managing director of Tehran’s Roads and Urban Development Organization, Fariborz Vahedi, has predicted that housing prices and rents will remain unchanged in the coming three months. His claim, however, is disputed by housing market analysts who say even slight rises in fuel prices and inflation could affect the renting prices.