Economy, Business And Markets

Housing Industry Is Becoming a Spent Force?

Housing Industry Is Becoming a Spent Force? Housing Industry Is Becoming a Spent Force?

The likelihood of economic growth as a result of a significant increase in demand in the key housing sector is simply unfeasible as the role and influence of this sector in terms of economic growth and job creation is a thing of the past.

While Iran’s economy is mired in a deep recession, the housing sector is showing signs of recovery. However, according to official data, more than 120 million square meters of housing has no buyers. Even if the market experiences a relative boom again, selling that many houses will take at least until the end of 2017, says Saeed Leylaz, an economist.

Commenting on the state of the lethargic housing market, Leylaz called it a “motor for growth during the past 60 years”, warning that the chances of improving economic growth as a direct result of an “explosive growth” in demand for housing are becoming increasingly bleak.

“Rein of the housing industry in economic growth and job creation – as has been the case in Iran’s recent history – has come to an end”, the news website of Iran Chamber of Commerce, Industries, Mines and Trade quoted him as saying.

Claiming that it is no longer possible to build 120-130 million square meters of homes a year – a feat that was achieved in the past – the former presidential advisor said: “Especially now that growth in population and marriage has slowed and considering the number of empty homes, real demand in the housing market won’t go beyond 80 million m2 per year.”

The senior analyst said that “if by a housing boom we are referring to a return to 2011-2012 – when 120-130 million m2 were constructed per year – then I believe the housing sector will simply not see that kind of boom. Bringing the volume of construction up to previous levels will only happen if the country employs an expansionary monetary policy with a 45% inflation rate again, while earning $200 billion in hard currency a year, he said.

Leylaz is of the strong opinion that “The government needs to shift its focus from the housing sector to promoting real demand in other sectors.” He did not name the sectors that can or should replace the construction industry.

Data shows that in the month of June, 60-70 square meter homes were the best-selling in terms of the number of houses sold, forming 16% of all deals officiated by real estate agents. With 14.4% and 13.8% respectively, 50-60 and 70-80 square meter houses came second and third.

In July, houses below 80 square meters accounted for 54.3% of all home sales, indicating that units with a small built-in area and not newly constructed had the most demand.