Economy, Business And Markets

Housing Market Refuses to Budge

Housing Market  Refuses to Budge Housing Market  Refuses to Budge

The typical first time home-buyer in Iran now will have to make do with rent for an extended 12 years before being able to fulfill the dream of buying a house. This is while a maximum of five years is the acceptable period according to Housing Affordability Index, a report by Construction Engineering Organization website indicates.    

Volatility in the property and housing market in recent years has put many Iranian households on a bumpy path toward home ownership. Currently, housing costs amount to an average 34% of the Iranian household’s total expenditure with the figure as high as 40% among low-income families. The global average ratio is about 25%.

To get a better picture of the situation and the issues at stake, the report has delved into some statistical data regarding families who don’t own a home and live in rentals. Among families who don’t own a house, 47.8 % belong to the four lowest deciles and 29% are part of deciles five, six and seven.

In cities, men are heads of households in 90% of the mentioned families and in 55% of the cases the family breadwinner is reported to be younger than 35. And among families living in rented houses, 70% have insurance coverage.

 Optimistic Outlook

Another factor is the expected increase in the number of urban households in the coming years. The next 13 years will witness an annual increase of 420,000 in the number of urban households.

Assuming an annual economic growth rate of 5.2% and a stable income distribution ratio among Iranian families, there will be an addition of 64,000 families in the ranks of those on a lower median income.

But that number is certain to be worse given the lackluster prospects of economic growth with the Central bank of Iran soon to report negative growth for the first quarter of the current year (started March 21).    

Assuming the likelihood of the aforementioned figures and relative stability in housing expenses, the Iranian homebuyer should rent for an average of eight years in the period spanning 2014-2027 and 5.5 years by the year 2027.  

Analyzing the disconcerting housing sector, Davood Daneshgar, an economic analyst, pointed to the persistent recession in the housing sector and said that the average cost per meter of an apartment in provincial capitals had risen by 23% by the end of the last Iranian year (ended march 20) , a trend which is visible also in the current year.  

“Decline in the supply of housing units will inevitably impact the rental housing market. Over the past two years a recession in housing construction plus a decline in banks’ lending power and the builders’ aversion to start new projects, accompanied by a sharp fall in construction profits have all led to a decrease in the supply of residential units,” the analyst told the website.  

This is while due to the increase in population and the marriage rate, demand for housing has been rising, he noted without mentioning that the purchasing power of Iranians has taken a blow for the past several years as the economy has stagnated and the dole queues have become longer.

Daneshgar also addressed the issue of unsold apartments and especially warned of the existence of a large number of empty homes in the central Yazd Province compared to other regions, but also pointed to the low population density in the city of Yazd. “There are close to 100 housing units for every 101 households in that city…in per capita terms it is the best in the country.”