Economy, Business And Markets

Realtor Positive on Market, Negative on Leasing Firms

Realtor Positive on Market, Negative on Leasing Firms
Realtor Positive on Market, Negative on Leasing Firms

According to the head of the Tehran Association of Realtors, an increase in the number of housing deals can be predicted during the first half of the current Iranian fiscal year that started on March 20, but said there should be no space for leasing firms.

Pointing to the extended slowdown in the real estate market, Hesam Oqbaei said that a decline in property sales is not uncommon during the last months of the year, eghtesadnews reported on Thursday.

The Central Bank of Iran’s report on “Trends in Tehran Real Estate Market” for Feb.20-March 19 shows that 13,139 home deals were registered during the one-month period, indicating an 8.5% year-on-year decline. The report also indicated that the average price of a housing unit, during the period stood at 42.1 million rials ($1,390) per m2, growing by 7.5% month-on-month and 3.9% at an annualized rate.

However, despite the doom and gloom marking the yearend report, the CBI expects the recession-hit sector to pick up slowly in the current fiscal year. The regulator is in fact largely pinning its hopes on the stimulus packages it unveiled last year that should be implemented in the coming weeks and months.

As part of the scheme the Money and Credit Council --a decision-making body -- agreed in mid-March to double the ceiling of Bank Maskan’s Housing Saving Account mortgage for newlyweds, raising it to 1.6 billion rials ($52,900) from the previous 800 million rials in Tehran. Regular home loans with or without a deposit also saw an increase in their ceilings.  

“Investment in the housing sector would necessarily not have short-term implications. Home construction, supply and demand normally are subject to a lengthy process. As such, the housing market needs a great deal of time to evolve,” he said.

“However, it is predicted that the first signs of improvement in the housing sector should emerge during the first half of the current fiscal year,” the realtor added.

 Leasing Issues  

Regarding real estate leasing, he said, “Leasing companies are intermediaries between people and banks. I believe that housing units should be made available to buyers directly from the sellers.”

Leasing firms visibly lacking a stellar performance were banned by the former government whose tenure ended in the summer of 2013. But some experts now say that the leasing industry should be revived simply because it can partially help bring the key housing sector out of the painful slumber.

Oqbaei, however, does not seem to agree with this group of experts. He warns about the disruption that the leasing firms can and will cause in the property market. “No broker or dealer exists between homebuyers and banks in other countries,” he said, echoing the stance of most market observers and homebuyers strongly opposed to any role for leasing companies in the already complicated property market in all major metropolises in Iran.

 He noted that in most countries a mortgage covers 80% of a property’s purchase price and that a leasing process would only make a bad situation worse, especially when it comes to taking out home loans for those at the middle and lower end of the economic ladder.

  Rantals Safe For Now

Managing director of the office for planning and economy (affiliated to the ministry of raods and urban development) also predicted  the housing sector will improve in the new fiscal year (started March 20), compared to the previous year but there will not be much fluctuation in housing prices.  

“Inflation rate in the housing sector will be less than the general inflation and a better atmosphere will prevail at the real estate market. However, this does not mean that we will witness a rise in prices,” Ali Chegini was quoted as saying by ILNA.

With regard to rentals in the coming months, he said in the last two years, rents experienced the least increase due to excessive supply.

Property owners unable to find buyers during the recession put up their houses for rent that in turn increased supply and stabilized  rents.

“It is expected that there will be no dramatic increase in rentals. Housing prices will also remain close to or less than the inflation rate while the potential for rents to go up cannot be dismissed,” he said.

Referring to the new housing loans he said the mortgages are a new phenomenon and familiarizing homebuyers with their function and application is a lengthy process. Therefore, the capital market can and should be seen as a “more realistic option for boosting the housing market.”

The Money and Credit Council recently agreed to double the ceiling of Bank Maskan’s Housing Savings Account mortgage for newlyweds. According to the directive, home loans for newlyweds in Tehran will be raised to 1.6 billion rials ($52,900) from the previous 800 million rials.

In urban areas other than Tehran, the young couples can qualify for 1.2 billion rials ($39,700), up from 600 million rials in the past. Those in towns with a population of less than 200,000 will qualify for 800 million rials ($26,400), twice the earlier 400 million rials.

The policymaking council had also agreed in May to double the borrowing limit for first-time buyers in Tehran to 800 million rials.