Housing Market Beholden to Parallel Markets

EghtesadOnline: As Iran continues to battle a currency crisis mainly brought about by expectations of worsening international ties because of the reimposition of US sanctions, the country’s housing market has experienced extreme fluctuations, especially in terms of prices, and its future seems completely tied to currency developments in the coming months.

News ID: ۷۴۵۷۷۹

04 August 2018

Mohsen Biglari, a member of Majlis Presiding Board, points out that five years of housing stagnancy that moved into recovery mode from about six months ago, coupled with the currency shocks, have severely impacted the market.

“Home prices are experiencing a jump, as purchasing a house has turned into a dream for many households,” he told HIBNA.

“But a part of this housing price jump is rooted in speculative activities so the government must make this market unprofitable for speculators.”

According to Financial Tribune, housing markets across the country have experienced significant price hikes in light of the combined effect of a long-awaited boom and a currency crisis, but Tehran has been hit harder than all.

The latest report by the Central Bank of Iran from Tehran’s housing market during the fourth month of the current Iranian year to July 22 showed that even as the number of deals declined by 7% annually, the average price of each square meter of a residential unit jumped by a whopping 54.2%.

Biglari said the rising trajectory of foreign currencies in Iran is worrisome and will continue to exert its influence on the housing sector, if it continues unabated.

“This entails a negative psychological effect for the people,” he said, stressing that local issues and wrong decisions have played a huge part in exacerbating the situation.

Economist Davoud Souri also believes that the housing market will continue to be affected by parallel markets, especially the currency market.

“Even as it is possible for current investments in the housing market to continue in the face of uncertainties, but if the uncertainties prevail in the coming months, the share of investments in this sector will dwindle significantly depending on the scope of insecurity in the society,” he told HIBNA.

The expert predicted that there is no room for home prices to decline in the coming months. He, however, said people can expect prices to reach a state of standstill during the second half of the current Iranian year, especially during the fourth quarter that will end in March 2019.

Souri said the lower number of home deals is because of a decline in demand due to unaffordable prices.