The latest analysis of data by the research arm of the Iranian Parliament has revealed that the negative growth in the property market will persist all the way to the end of the current fiscal year in March.
“A look at the statistics released by the Central Bank of Iran and the Statistical Center of Iran shows that the housing sector slipped into recession from March 20, 2012, and experienced negative growth rates ever since,” the report by Majlis Research Center was cited by Banker.ir.
“This recession has persisted through 2015-16 and predictions show that this period of recession will continue until the end of the current fiscal year [on March 21], meaning that the housing sector’s stagnation has turned into a five-year recession.”
The think tank, which reviewed data from 1992 to 2015, notes that a notable discrepancy is witnessed between the statistics released by CBI and SCI, especially when one claims growth in the housing sector to be positive, while the other says it is negative.
“For instance, in 1994, CBI announced that growth in the housing sector was -1.4% while SCI said it was 28%,” cites the report, adding that CBI figures put the housing sector’s growth at 1% in 2010 while in the same period, SCI claims that the growth rate was -5.3%.
MRC, however, points out that both entities have published homogeneous figures from 2012 onwards, which confirms the recession currently gripping the housing sector is indisputable.
The report also indicates that in 2012, the growth rate of government investment in the construction sector was so deeply in the red (-60%) that “it undermined the positive growth rate of private sector investment in the housing sector and made the growth in the sector negative”.
Public, Private Investments Drop
It identifies the “tangible drop” in oil revenues, which was a direct byproduct of international sanctions against Iran, as the reason behind the hefty drop in government construction spending.
The public and private sectors seemingly switched places during 2013-14, as government construction spending registered a positive growth rate, “but the overall growth rate of the housing sector was again negative as a result of the negative growth rate in private investments”.
Things took an even worse turn in 2015 when both public and private investments in the beleaguered housing sector dropped, leading to the further deepening of the recession.
As the parliamentary research center notes, “The number of construction permits issued in urban areas is another barometer of recession in the housing sector.”
Since 2012, the number of construction permits experienced a negative growth rate, with the worst rate of -32.1% in 2014.
On the other hand, MRC notes, the number of residential real-estate deals in 2014 was lower than in 2013. But the trend “almost made a U-turn” during the first eight months of the current fiscal year (March 20-November 20) and six of those eight months registered strong positive growth rates.
The research center concludes by saying that while these latest statistics can be interpreted as a sign of a gradual exit of the key sector from recession, “they cannot be seen as a reason for a housing recovery because these deals relate to residential units built before 2016, not after it”.
According to the latest survey by the Central Bank of Iran, the average house price in Tehran during the Iranian month of Dey (December 21-January 19), increased 9.9% from a year ago —a measure of the cost per square meter of floor space.
During the 10th month of the Iranian year (ended Jan. 19), 16,749 residential real-estate sales were registered in Tehran, which indicate a 41.6% increase compared with the previous month and a 3.2% rise compared with the same period of last year.
Hassan Mohtasham, the head of the Association of Home Builders, has warned that if the downturn in the housing sector persists, it will lead to negative repercussions such as increased unemployment and crime.
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