Lower Forex Rates to Bolster Housing Sector

EghtesadOnline: Fluctuations in the currency market had caused a price hike in Iran's already beleaguered housing sector, but even though foreign exchange rates have currently cooled down, they are expected to have a positive impact on the housing sector.

News ID: ۷۴۵۰۸۵

03 March 2018

Ali Qaedi, the deputy head of Planning and Housing Economy Office affiliated with the Ministry of Roads and Urban Development, conceded that the jump in currency rates increased home prices, but also noted that the Central Bank of Iran's successful measures in taming the currency rates has led to positive results for all markets, including the housing market.

"Higher prices in the housing market have been relatively controlled and speculators have now exited the market," he told HIBNA.

The past few months have proved tumultuous for the currency market with the US dollar and euro reaching new heights against Iran's rial. This prompted CBI to intervene and curb the rates by way of a crackdown on black market speculators and introducing certificates of deposit with 20% interest rates, Financial Tribune reported.

According to Qaedi, the housing market is witnessing "consumptive demand" from real customers as opposed to speculators.

"When evidence from markets creates the belief in people that foreign exchange rates are to rise, the prices of other goods and the general inflation go up as well. These emotional reactions led to a hike in home prices and prompted people to want to buy homes at any price," he said.

The official said housing market price hikes of recent months are predicted to abate and "balance out" in the foreseeable future.

CBI's report of Tehran's housing market for the 11th month of the current fiscal year to Feb. 19 indicates that the average price of each square meter of a residential unit in the capital city jumped by 22.3% compared with the same month of last year.

This is while the Statistical Center of Iran said the average price of one square meter of land or residential unit in the whole country experienced a 17.8% surge during the third quarter of the current year compared with the third quarter of last year.

But while price jumps may cool, the head of Tehran Association of Realtors recently said the general belief is that prices will increase at a rate higher than the inflation rate currently hovering at 10%.

Hesam Oqbaei, the deputy head of Tehran's Association of Realtors, said he does not believe that increased currency rates have completely depleted the housing market of capital.

"It cannot be claimed that fluctuations and increases in foreign exchange rates have caused a significant volume of capital in the housing sector to be directed toward the currency market," he said.

However, the official noted that a portion of the capital deposited in banks for receiving high interests were taken out of the banks and found its way into the forex market instead of the housing market.

"This was also influential such that the volume of home deals registered in the 11th Iranian month [ended Feb. 19] declined after a period of notable increases," he said.

According to CBI, the number of housing deals in Tehran reached 18,400 during the month to register a 17.7% increase compared with the same month of last year, while the volume of home sales showed an annual surge of 50% during the ninth month [ended Dec. 21].

Oqbaei said the number of building permits has not seen a meaningful rise this year in Tehran.

"I hope Tehran Municipality would move to issue more permits during the next [fiscal] year [starting March 21]," he said.