The Majlis Research Center says in a new report that the housing sector is not capable of acting as a driving force for the economy, saying that the apparent weakening purchasing power and large inventory has made housing recovery a goal that may be realized in the too distant future.
"There is a serious imbalance with respect to demand and supply, which is keeping prices from rising," the report says, warning that home prices may even start to fall.”
Noting that buying a house is normally a concern of lower and middle income households, the research body says, “Given the share of housing in an average family's expenditure, and the lackluster impact of fiscal and monetary policies on the market, it is obvious that these social groups will not be able to own a home, not even in the long-run.”
Housing mortgage should be "made available at the lowest possible interest rate with the longest possible repayment period,” the research suggests.
The government has attempted several schemes to resuscitate the stagnant property market, including long-term mortgage loans. The loans, however, have been criticized as being too little too late in that they barely cover 50% of an average house in major cities.
Levying taxes on empty property, as the government is planning, would further reduce investments in the housing sector in the middle and long terms “since, currently there is no demand for empty houses.”
Some 1.66 million homes are vacant in the country, according to the think tank, 312,000 of which are in Tehran alone.
Possible Solutions
The center points to the alarming rate of urbanization as a major contributor to housing woes in most major cities, and calls for the adoption of new policies to tackle the problem.
“First, distressed urban areas should be renewed in light of the new curbs imposed on the expansion of cities. Secondly, palpable economic incentives should be offered to encourage people stay in their hometowns.”
Financing homebuyers in smaller cities with 70% of the total value of homes would be a feasible solution, according to the think tank. “Creating housing funds and providing them with long-term finance would also help.”
The government has announced plans to boost the housing market through renovation of 300,000 residential units in distressed urban and suburban areas. The next fiscal budget (2016-17) has allocated 12 trillion rials ($400 million) for providing 50-million-rial loans for renovating each dilapidated residential unit.
“Improving the quality and quantity of public transport in urban areas is also instrumental in addressing the issue.”
In the 1950s-60s Iran had a population of 30 million, 70% of which lived in rural areas. To the dismay of seasoned observers and thanks to the mismanagement of urban planners and insatiable avarice of municipalities, today it is the other way round!
