Tehran Home Prices Signal Recovery

The average house price in Tehran during the last month of summer (Aug. 23- Sept. 22) increased by 9.7% from a year ago—a measure of the cost per square meter of floor space.

The latest survey by the Central Bank of Iran also indicates that house prices per square meter registered a monthly increase of 1.9% to stand at 47.6 million rials ($1,220).

The report sees the price increase as a sign of the key housing sector entering the recovery phase after an impressive performance during the previous month, the latest issue of CBI’s “Trends in Tehran Housing Market” reported.

District 5, located in the northwest of the city, experienced the highest average growth in price at 12.5% compared with the same period of last year.

Prices for residential units located in District 22 experienced the lowest rise at 0.4%. This is while the district continues to record the highest number of sales among Tehran’s 22 districts, accounting for 16.9% of the total home sales. Districts 4 and 2 come next at 10.9% and 9.9%, respectively.  

The trendy District 1, with an average price of 100.4 million rials ($2,564) per square meter, is the most expensive area while in southern parts–which include District 18 (the cheapest neighborhood)–the average home price hovers near 22.8 million rials ($584) per square meter. Prices in districts 1 and 18 grew by 10.3% and 7.8%, respectively.

The report also notes that apartments measuring 60-70 square meters accounted for 14.8% of the total sales during the one-month period. Residential units with a floor area of 70-80 square meters and 50-60 square meters take second and third spots, accounting for 13.4% and 12.7% of the total sales respectively.

“Residential units in the price range of 30-35 million rials ($770-900) per square meter grabbed the highest share of the real-estate deals in Tehran at 10.9%,” the report said regarding home sales in the price category.

Despite the fact that new apartments (up to 5 years old) still account for the biggest share of house sales at 47.5%, the trend is seeing a steady decline as older apartments begin to gain in popularity.  

As the report indicates, the sale of new apartments shrunk by 0.9% compared with the same month of last year while houses that were 16-20 years old and older than 20 years experienced a surge of 60.5% and 41.1%, respectively.

 Sales Figure

A total of 16,749 residential real-estate deals were registered in the capital during the last month of summer, which indicates a 9.2% rise compared with the same period of last year.

However, the volume of sales during the aforementioned time indicates a 13.6% drop compared to the previous month when nearly 18,000 apartments were sold in the Iranian capital city, which is unprecedented since May 2014.

The decline in the volume of home sales during the month to Sept. 22 could be ascribed to a number of factors.

Despite the fact that allocation of cheap loans to first-time home buyers has boosted demand, lack of suitable small apartments has left a portion of home applicants with few options.

The Iranian government has been endeavoring to end the beleaguered sector’s recession that began in 2012. The allocation of cheap loans to first-time homebuyers and incentives for builders, especially in distressed areas, was among government measures undertaken for promoting the market.

This is while after the market showed positive signs during the previous month, some owners increased their offered prices so the market witnessed its negative effects during the following month with a 13.6% decline in the volume of sales.

During the month to Sept. 22, residential units priced lower than the city’s average accounted for almost 52% of the deals while apartments smaller than 80 square meters proved to be the preferred choice of most buyers, as they constituted more than half of the entire home sales in Tehran.

So a majority of people are more interested in cheaper and smaller apartments, as their purchasing power has weakened in the face of record rise in home prices between 2005 and 2012.

The administration of President Hassan Rouhani is mulling plans to make home loans even more affordable by increasing their ceiling and extending the repayment period.