Economy, Business And Markets

Rewards, Risks in Post-Sanctions Housing Market

Rewards, Risks in Post-Sanctions Housing Market Rewards, Risks in Post-Sanctions Housing Market

Most markets have reacted positively in the wake of the historic nuclear accord reached between Iran and world powers in anticipation of an easing of sanctions. The housing sector, however, continues to beat the pundits with mixed signals that make definitive forecasting tricky.

Financial Tribune’s sister daily, Donya-e-Eqtesad, carried an exclusive report on Monday, polling nine housing experts to shed light on the issue.    

Most experts agreed on the fact that the nuclear pact would not have any “shock effects” on the housing market and that the market would remain more or less on its current stable–albeit depressed—path.

 No Short-Term Effects

Hamed Mazaherian, the housing deputy at the Ministry of Roads and Urban Development, said since 60% of home prices constitute the value of the property on which it is built and because that is determined purely by domestic factors, the effect of sanctions relief on the housing market would be feeble.  

“The remaining 40% are determined by construction costs influenced by the country’s inflation rate and that means prices will eventually go up,” Mazaherian predicted, adding that the price hike would be meager in the short run.

He said, however, that the injection of foreign investment into the economy and the housing market in particular would heat up the market in the medium term.

Behrouz Maleki, a housing expert, also remarked that the housing market usually remains impervious to external factors since it considers itself too grand to be affected by transitory upheavals.

“A glance at the housing market during the past 25 years reveals that the housing sector has rarely shown any sudden reactions to such happenings but it is expected that the gold and currency markets would face cash shortages in a post-sanctions era and that would make the equity market and the housing market attractive to investors,” Maleki contended. “The reaction in the stock market would be swift but in the real-estate market only gradual.”

 Difficult Prognosis

Fardin Yazdani, a housing analyst, said sanctions relief would improve the economy and increase the purchasing power, arguing this would intimately benefit the housing market.

“The boom would not occur, however, until all sanctions are lifted which would take from six months to one year,” he said.

“The main problem facing the housing market is a shortage of demand and the outcome of this depends on the actions of the government.”

Yazdani added that if the government lets a flow of cash into the housing market without managing supply, home prices could shoot up.

Gholmareza Salami, a senior advisor to the minister of roads and urban development, believes that unless all the sanctions are removed, it would be very difficult to make a prognosis.

The future of the housing market is confounding even the most adept experts in the field but almost all of them are positive that the government policies in the coming months would be key in determining its ultimate course.