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Property Market Still Has to Wait
Economy, Business And Markets

Property Market Still Has to Wait

A member of Tehran’s Chamber of Commerce, Industries and Mines says easing of the recession in the housing sector should not be expected anytime soon. Contrary to most observers, he says the effect of any stimulus plan in the housing sector will be felt in 2017.

In an interview with the TCCIM website, Mohammadreza Zohrevandi, the deputy head of Iran’s Lift and Escalator Industry Association, pointed to the number of construction permits issued in the year that ended March 2016 saying it shows a 5% decline compared to a year earlier meaning that the property market’s exit from recession is unlikely in the near future.

He added that the number of construction permits issued in Tehran Province reached close to 5,000 in the period, down from 15,000 a year ago.

Some officials like Hamed Mazaherian, deputy minister of roads and urban development had earlier predicted that an upsurge in the housing market is likely toward the middle of the Iranian fiscal year in September 21. Also according to Hesam Oqbaei, head of theTehran Association of Realtors, an increase in the number of housing deals was predicted during the first half of the fiscal year.

Increase in the mortgage ceiling by Bank Maskan and the relatively large number of homebuyers who have applied for Bank Maskan Housing Savings Account for first-time homebuyers is seen as the optimism driving the housing recovery.   

“The surge in home loans will move the sector to some extent but will not be so strong as to end the recession.  In addition to increasing housing loans and lowering the mortgage rates, other issues should also be taken into account to get the property market up and running,” Zohrevandi said.

Officials in the Roads and Urban Development Ministry have touted increase in the housing loans as one of their key policies. They hope it will help increase purchasing power and energize the stagnant housing sector.

 5% Growth Not Possible

The official added that at the macroeconomic level the government should pursue a program of quantity easing to help revitalize the economy and ease the recession. “If such policies are executed by the government, the property market will also improve.”

Pointing to the 5% growth rate projected for the economy this year, Zohrevandi said achieving such a feat is next to impossible due to a plethora of problems besetting the industrial sector. Noting that a 5% growth rate will not materialize, he concluded that the economy and the housing sector will remain in recession this year.

Zohrevandi warned against the negative effects of increasing home loans saying it could create a sharp increase in housing prices similar to what happened in the case of auto loans last year.

The urban development ministry officials, however, have dismissed such claims saying that raising home loan ceilings will not push up prices. They believe that with a reenergized property market the increase in prices will not exceed the general inflation rate.

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