Economy, Business And Markets

Housing Market Improving Slowly

Housing Market Improving SlowlyHousing Market Improving Slowly

The recent reported increase in home sales raises hope that the long stagnant housing market and the economy are slowly leaving recession behind, head of Tehran Association of Realtors said Monday.

Hessam Oqbaei said, however, that housing industry had been “ailing” and called for effective ways and new incentives to restore the key sector, Tasnim New Agency reported.

Referring to the bubble in rental prices in summer he said “Some landlords raise the rents as they compare it with the deposit rates offered by banks. But leases of residential units are normally calculated on the value of the property and therefore rents should not have increased.”

Rentals increased by 10% in the second quarter of the Iranian year (started March 21) compared with the same period last year. However, the TAR head  said  the rise in rentals “would slowdown” as moving house almost comes to a halt in autumn.

The real price of a house should include a 20% margin for the owner, but builders normally add 120-150% to the cost price of the buildings, he was quoted as saying.

“The market boosts as the prices get more real,” he added.

According to the housing official, “There is high demand for buying houses but stronger incentives are needed to augment purchasing power” of the common people.  Over the years Iranian banks have done a poor job when it comes to lending to first time home owners by offering less than five percent of the price of an ordinary apartment across the country.

 Blaming Brokers

Oqbaei’s comments come on the heels of talk in Ministry of Roads and Urban Development about reordering the activities of real estate agencies.

On Tuesday, Nabiollah Ahmadi, a lawmaker, charged that “illegal activities by real estate agents” give rise to deep fluctuations in the housing market.

“Monitoring brokers is an effective measure to control the market; regulations should be revised to help prevent them from overcharging,” he was quoted as saying by the local media.

The government has taken several measures in recent months but failed to prop up the stagnant housing market.

In May, the Money and Credit Council decided to almost double the borrowing limit for first-time buyers to 800 million rials ($24,000); though, applicants are required to make a deposit for one year to get the loans

Taxing empty property is also seen as another effective measure to reactivate the housing market. However the issue is deep in controversy because there seems to be no consensus even in government circles whether or not to tax the increasing number of empty units, especially when the market is in decline and there are few, if any, buyers.