Factors Behind Tehran Home Rent Rally

Defying the housing market’s years-long sluggish trend and flat home prices, home rents are registering growth.

Deciphering the enigma, director of Tehran Association of Realtors has cited three reasons for the anomalous trend.

“The major determining factor of rents is the property’s value, but this rule does not apply to our country due to three factors: First and foremost, the demand for housing in the capital outweighs supply and hence the hike in rents,” Hesam Oqbaei told state radio, Tasnim News Agency reported.

He traced the second factor to the headline inflation that affects home rents like in every other market.

“Currently, the inflation rate in the country is around 12-13% while the average growth of rents in Iran has not exceeded 7-10%,” he said.

While the average growth of rents across the country might be 7-10%, the figure in capital is far more than that.

Local realtors in northern districts of Tehran have told Financial Tribune that apartments’ rents in the upscale areas have significantly risen by up to 40%, compared with the corresponding period of last year.

Inquiries in central and southern parts of the city revealed that rents have increased by 20-30%, which are higher than the average increase announced by officials.

Oqbaei mentioned bank high interest rates as another major reason for rents’ bullish trend.

“An apartment located in western parts of Tehran worth around 5 billion rials ($131,000) fetches a maximum rent of 20 million rials ($524) per month while banks offer 100 million rials ($2,622) for such a deposit. Therefore, owners expect that kind of profit from their property,” he explained.

The director of Tehran Association of Realtors noted that high interest rates have pushed Iran’s production sector to the brink of recession, hence people are more eager to deposit their savings in banks and this stokes the growth in rents.

The realtor criticized private banks for waging a price war over interest rates.

“Private banks have established a mafia and their operations have nothing to do with banking activities and now even the Central Bank of Iran cannot control them. Banks own lots of residential and commercial complexes across the city, which is definitely against the law,” he said.