Lack of an effective tax policy for vacant homes has given rise to property hoarding in a market beset by recession.
As the housing market bubble burst in 2013, property owners suspended deals, saving their homes for the market’s next boom and more lucrative deals.
According to current regulations, homeowners have total freedom over their property. However, speculative activities such as hoarding keep the prices high and impose extra pressure on the demand side of the market, Donya-e Eqtesad Weekend’s Supplement reported on Thursday.
Tehran alone had 327,000 empty houses in Tehran in 2010-11, while the number dropped significantly during the following two years when the market experienced a boom. Only 137,000 empty houses were recorded in the second half of 2012-13. However, the number of Tehran’s empty houses reached 235,000 by the end of July 2015.
Levying taxes on vacant properties is a measure employed widely by governments across the world to tackle the growth of property hoarding.
Despite recent attempts, officials have not been able to tax empty homes for various reasons, including lack of the right mechanisms to identify all the vacant houses across the country.
Recent tax reforms require homeowners in cities with more than 100,000 residents to pay tax on their vacant properties.
Unfinished Constructions
The surge in the number of unfinished constructions also poses a threat to the market as it is getting closer to the boom. Usually, builders stop construction of houses during recession and restart the process when homebuyers return to the market.
During the housing market’s boom in June 2013, investments in unfinished constructions increased by 36%. However, in June 2014, when the market was in recession, only a 19% growth investment was recorded.
Central Bank of Iran’s statistics show that during the previous fiscal year (ended March 20, 2015), about 450 trillion rials ( $14.9 billion) were locked in unfinished construction projects, marking an increase of 11% when compared to previous years’ data.
Housing sector, which is struggling with a long-running recession, is a key sector in Iran’s economy. The industry contributes to almost 20% of gross domestic product and employs 13% of the working population.
