Economy, Business And Markets

Housing Industry Future Uncertain

Housing Industry Future UncertainHousing Industry Future Uncertain

The housing sector is languishing for a third consecutive year in recession with no respite in the foreseeable future.

Analysts like Hesam Oqbaei, head of Tehran Association of Realtors hold the view that by the next Iranian year (starts March 21, 2016) the key sector will eventually awake from its slumber.

However, he adds that if the government fails to take effective action to address the compounding ills of the housing market it may face total insolvency with stagnation persisting for another four years.  

 Other experts like Hussein Abdo Tabrizi, advisor to the minister of roads and urban development, blame opportunists and greedy middlemen who refuse to sell their property waiting for fatter profits.

As reported by ISNA, Abdo Tabrizi is of the opinion that the supply of housing units has been relatively sufficient in recent years.”The total worth of empty houses in Iran is in the range of $20 billion. A large number of old houses, worth an estimated $27 billion, have been demolished and replaced with new ones over the past ten years.”

Abdo Tabrizi predicts that housing prices will remain flat for the next three years and has urged builders to sell their empty units. He says that waiting for higher prices as akin to a pipe dream.  

  Down to the Roots  

Housing woes first came to the fore in February 2013 when builders embarked on a frenzy to build luxury homes in spite of the 400,000 empty units that already existed in Tehran, especially in the upscale northern districts. The gaping hole between supply and demand finally exposed the situation for what it was: the bubble burst and an estimated 240,000 units were left without buyers.

Then recession reared its ugly head and enveloped the economy affecting the industries and subsectors dependent on the construction sector. As a result the financial momentum stalled coinciding with the economic sanctions adding insult to injury.

The housing sector is now facing three dilemmas: a supply side surplus, lackluster demand due to the decline in purchasing power and the accumulation of demand in the long-run.

  Some Solutions

Saeed Ageshte, an analyst, says to solve the problem “we first need to stoke demand.” He sees lower interest rates as good step to attract homebuyers back to the market.

Abbas Akhoundi, the minister of roads and urban development, has his own solution. Retrofitting distressed urban areas, expanding the suburbs and expanding transportation to the suburbs are among his proposals to help improve the sickly housing market. “My ministry’s signature policy is urban regeneration aimed at helping those living in poor housing conditions.”