Economy, Business And Markets

Banks Urged to Stay Away From Housing Market

Banks Urged to Stay Away From Housing Market Banks Urged to Stay Away From Housing Market

Head of Tehran Association of Realtors has cautioned against the interference of banks in the real-estate market.  

Hesam Oqbaei urged banks on Saturday to steer clear of the beleaguered housing market, saying this would bolster “a surge of money” in the market, the website Banker reported, citing the official.

“This behavior by banks would drive up home prices significantly,” he said, referring to commercial banks’ active presence in the real-estate market.

Banks have come under fire in recent months for their non-banking business activities, which is said to be perilous both to the banking industry and the stability of markets in which they operate.

“The government should direct its policies toward including true homebuyers in the market so that home sales would be for the purpose of living and not speculation,” he said.

Oqbaei predicted that the implementation of the second phase of subsidy plan this summer would help stabilize prices and heat up the sluggish market.

 The Subsidy Reform Plan pays 455,000 rials (about $15 based on the official exchange rate) to Iranians, eliminating subsidies for fuels and some commodities. The second phase of the plan, however, aims to eliminate subsidies for “well-off” households.

“A lively market, of course, does not mean higher prices and purchasing homes for the purpose of dwelling in them is always recommended,” he said.

Oqbaei’s comments come as new data show housing deals are getting less affordable for people living in Tehran, in line with a recession that has lasted for two full years.

The average price of an apartment in the capital reached 38.9 million rials ($1,180 at market exchange rate) per square meter in the month to June 21, according to the latest report published by the central bank, marking a 3% fall year-on-year. The report adds that the number of housing units sold in the third month of spring this year dropped to 15,661 from 17,303 in the same month of last year, showing a 9.5% fall.

 Plan of Action

Oqbaei said in order to exit the present recession and achieve market stability in the housing sector, a comprehensive plan covering construction, supply and demand is needed.

He added that while it was widely believed the housing sector was ready to move in the third quarter of the previous year (ended March 20), which did not happen and perpetrated the “deepest downturn” in the market.

“Prices have fallen sharply this year but potential homebuyers are still waiting for further price drops,” he said.

Oqbaei maintained that any increase in mortgage ceilings may be helpful in small towns but would not be effective for the housing sector in Tehran, in a reference to the housing stimulus package whereby banks offer low-interest home loans to first-time home buyers.

The Money and Credit Council, the highest policymaking body of the central bank, agreed May 19 to almost double the borrowing limit for first-time buyers in Tehran to 800 million rials ($25,000 at the market exchange rate).