Economy, Business And Markets

Better Times Await Property Market

Better Times Await Property Market  Better Times Await Property Market

The property market is about to enjoy a relative boom in the coming fiscal year (starting March 20), a housing expert has predicated.

“A relative boom is certain for the housing market by the next fiscal year; however, a ‘big’ boom is yet to happen simply because it takes time for home prices to moderate and for inflation to be tamed,” Keivan Shadman was quoted as saying by eghtesadnews.

Shadman is the latest among officials and housing market observers to forecast some relief for the depressed real estate sector that has so far remained stubbornly unresponsive to stimulus measures.  

“It is expected that Iran’s economy, including the housing market, will see better growth rates after the sanctions were lifted last month. However, as the government focuses on ways to curb inflation, the big economy remains elusive,” he said.

Investment companies are not pocketing the expected profits from their real estate investments compared to rate of interest on bank deposits even though home prices remain high, he said. “The government needs to stimulate the housing industry through further interest rate cuts.’’

Obviously, it is not the “need for housing” that drives builders to participate in the housing industry, he said. “It is profit and economic gain that they are after.”  

Therefore, when investors see more profit in bank accounts or stock returns, they are not much inclined to invest in housing; hence, in order to keep  inflation rates low the government should lower interest rates,” Shadman said.

Official data says inflation presently is hovering around 13%, down from the 40% when President Hassan Rouhani took office in the summer of 2013.

Concerning the recent rate cuts by the Money and Credit Council, he said, “Given the percentage point decrease in interest rates along with the lifting of the international sanctions, we can fairly hope for a better new year. However, a major boom followed by a high inflation rate is not expected.’’

A reasonable rate of inflation can and should be expected for the housing market in line with other commodities, but double-digit inflation is definitely not in the making for the key sector, he added.

Commercial banks this month agreed to cut deposit rates in a move welcomed by the CBI, after the lifting of economic and banking sanctions renewed hopes for less inflation and more growth.

Banks decided to cut their one-year deposit rate from 20% to 18% while the overnight deposit rate will fall below 10%.