Economy, Business And Markets

Housing Sector Recovery in Crosshairs

Housing Sector  Recovery in Crosshairs Housing Sector  Recovery in Crosshairs

The housing market is one of the alluring and profitable sectors of the economy in times of economic growth. It also is a key sector with almost 200 occupations and industries depending on it for survival.

Role and influence of the housing industry places it on a special pedestal more so when this sector is suffering due to a long-running recession.

Donya-e-Eqtesad, Financial Tribune’s Persian-language sister newspaper, has conducted a survey asking officials, economists and real estate analysts about the current situation and future prospect of the housing market that seems to have lost its appeal.

Questions revolved around the reasons for the housing market getting the short shrift in government’s recent stimulus package. The survey wanted to find out when the housing sector would exit recession and the possible price fluctuations that could rock the sector if and when a boom finally occurs. Experts also gave their views on how to expedite the housing market recovery.  

Many believed that the housing sector’s undeserved absence in the economic incentive package was “due to the scheme’s short expiry date,” which makes it unfit to address the housing sector’s woes which usually require long-term planning.

Some pundits, like Mostafa Ozgoli, Bank Maskan’s financial group’s manager  however, claim that the package targeted consumer goods like cars and home appliances with the “aim of bringing about a faster recovery” to the struggling production sector.

The second issue addressed in the survey was the time required by the housing sector to reemerge and set the stage for a normal construction business. Some analysts believed that the housing sector will lift itself from recession come spring while the majority believe September 2016 could be the time for the hibernated sector to rise and shine again. The construction of new houses will ensue after 3-6 month from the revival of real estate deals according to the survey results.

House prices after the hypothetical boom was one issue raised in the survey. Those surveyed almost unanimously ruled out the possibility of any significant price hike after a possible boom. They said a “slight increase in prices may be possible in coming year (starts March 21, 2016) but it will surely be less than the inflation rate.” Therefore, the nominal prices may rise but real prices will not change much given the trend in the last 2-3 years.

Last but not least on the list of questions was “what measures do you suggest for helping the housing market get out of recession?” Almost all respondents said it is the need to lower interest rates. Analysts claimed that cutting rates could encourage the return of capital to the ailing housing market, stimulate demand and create the conditions to restart the construction of new housing units.

Another recurring suggestion was to stimulate demand by offering low-interest loans that “cover a good part of an apartment’s price.” Respondents also mentioned house leasing schemes, housing savings accounts and mortgage bonds as other remedies to revive the industry.