Tehran's Home Prices on the Rebound

The average house price in Tehran stood at 43.7 million rials ($1,165) per square meter, registering a year-on-year increase of 3.6%, the latest report of the Central Bank of Iran for the first month of the Iranian New Year (started March 21) said.

The figure dropped by 4.3% compared with the previous month.

The number of residential real-estate deals in the capital dropped by 8.5% to reach 5,400 during the same period compared with the correspondent figure of last year.

New apartments (up to 5 years old) accounted for the lion's share of house sales at 45.7%.  However, its share witnessed a decline of 20% YOY.

As the report indicates, the sale of new buildings gave way to older ones. Houses that were between 16 and 20 years old experienced a surge of 32.4% in sales YOY.

This is while the biggest jump of 15.7% in average home prices occurred in District 22 (a mid-priced neighborhood), while the biggest drop of 13.8% pertained to the upscale District 1.

 District 3, located in the city's northern parts, recorded the highest average price of housing deals–overtaking District 1 for the first time in recent memory. The figure stood at 81.2 million rials ($2,165), which is considerably high when compared with District 18 where prices hover around 19.7 million rials ($525).

Rents in the city of Tehran and in other urban areas of Tehran province registered a year-on-year growth of 11.1% and 9.2%, respectively.

Buyers' Preferences

Some 65% of all the housing deals had an average price of under 40 million rials ($1,100) per square meter while residential units smaller than 80 square meters accounted for about 55% of the total sales during the period.

President Hassan Rouhani recently weighed in on the housing market and said, "We are facing no recession in our economy other than the housing sector," announcing a new 100-day plan for the key sector.

As CBI's survey reveals, cheaper and smaller apartments located in low-priced districts of the city are witnessing an increase in both sales and prices.

This is indicative of the fact that homebuyers are showing more interest in buying cheaper units in a sign of weaker purchasing power.

Home prices experienced a whopping rise during the tenure of former president, Mahmoud Ahmadinejad, who held office during 2005-12.

During his two-term presidency, home prices rocketed by 300% when Iran's national currency lost much of its value.

The price bubble remained in place, therefore a majority of people could no longer afford to buy a house. This resulted in recession for the key sector from which it has not been able to escape after five years.

According to housing officials, the sector is entering a boom phase during the first half of the current year and prices are forecast to go up by 15%.

As people are eager to buy cheaper homes and all the data in CBI's report suggest that people's purchasing power is weak, it remains to be seen whether homebuyers will be able to afford any future jump in prices.