Bleak Prospects for Dull Tehran Real Estate Market

EghtesadOnline: The housing market in the capital continues to show signs of inflationary recession, as has been the case in the past months.

News ID: ۷۴۸۰۲۴

30 July 2019

Latest data released by the Central Bank of Iran show home prices in Tehran increased while the number of property deals declined in the fourth month of the current Iranian year that ended on July 22.

According to the report, 4,790 homes were sold in the capital during the fourth month of the current fiscal year, signaling a year-on-year decrease of 64.6% compared with the 13,514 deals in the corresponding month of last year.

The number of property deals fell by 20% compared with the preceding Iranian month, Financial Tribune reported.

The average price of each square meter of a residential unit in Tehran stood at about 133.51 million rials ($1,103) during the month under review, showing a year-on-year surge of 91.5%, as prices averaged at 69.72 million rials ($576) in last year’s corresponding month.

Home prices in the capital grew by 0.4% compared to about 132.99 million rials ($1,099) in the third month of the current year.

Home Supply Deficit

Fardin Yazdani, the Comprehensive Housing Plan’s deputy for research, blames a widening home supply deficit for the stagflation in the housing market.

Referring to increasing home prices of late in line with the decline in home deals, Yazdani noted that the main reason for this is that the housing sector has failed to boost production.

"In other words, despite strong demand in the housing market over the past year, the supply side has failed to catch up," he was quoted as saying by the news service of the Ministry of Roads and Urban Development.

Referring to the high prices of land and construction materials as the main reason for the lack of housing production, the official said, "Builders are not finding the housing market as lucrative as other markets."

Yazdani expects the current inflationary recession in the housing market to continue, although he expects rising home prices to lose momentum in the coming months.

"Should the supply of homes catch up with demand, we can expect the market to find balance," he concluded.

Details of Property Deals

The CBI data indicate that during the month that ended on July 22, residential units up to five years old grabbed the highest share of the total of 4,790 deals at 40.2%, down by 3.6 percentage points compared with the same month of last year.

That lost share was added to homes six to 10 years old and those between 16 and 20 years that registered an 18.1% and 16.1% share of the total deals respectively.

The share of deals involving homes above 20 years has also increased from 10.4% of the total deals last year to 12% this year; they had the smallest share of total deals in the same month. Homes 11 to 15 years old posted a share of 13.6% of total deals.

The distribution of dealt properties shows that among Tehran's 22 districts, District 5 once again grabbed the highest share of total deals at 12.4%. It was followed by districts 2 and 4 with a respective share of 9.1% and 9%.

All-in-all, 10 districts (five, two, four, 14, 10, one, seven, 15, eight and 11) grabbed the lion's share of the deals at 71% with the remaining 12 districts holding a 29% share.

District 11 registered the highest average annual price growth at 116.8% during the fourth month of the current year. Homes located in District 6 had the lowest year-on-year average price hike at 77%.

Among Tehran's 22 districts, District 1 registered the highest average home price of 298.3 million rials ($2,465) per square meter. District 18 offered the capital city's cheapest homes with average per-square meter price standing at 60.9 million rials ($503). These figures show a respective increase of 97.5% and 96.5% YOY.

Residential units with an average price range of 60 million rials ($495) to 75 million rials ($619) per square meter and those of 75 million rials to 90 million rials ($743) per square meter were the most popular in Tehran during the Iranian month under review as both grabbed a 10.3% share of all deals.

They were followed by units priced at 90 million rials ($743) to 105 million rials ($867) per square meter that grabbed a share of 10.2%.

From the total number of deals, 58.7% belonged to homes cheaper than the average per-square meter price of the city (133.5 million rials or $1,103).

Residential units with a floor area of 50-60 square meters grabbed the highest share of total deals with 14.6%.

Units with an area of 60-70 square meters and 70-80 square meters ranked second and third with a share of 13.8% and 11.9% respectively. All-in-all, units with an area below 80 square meters had a 54.3% share of total deals.

CBI data further show that Tehran’s homes worth between 3 billion rials ($24,793) to 4.5 billion rials ($37,190) were the most popular with a 14.6% share of total deals.

Homes with price tags of between 4.5 billion rials and 6 billion rials ($49,586) and those between 6 billion and 7.5 billion ($61,983) came next with a share of 12.8% and 10.2% of total deals.

Collectively, homes valued under 9 billion rials ($74,380) had a 51.9% share of total home deals in Tehran during the fourth month of the current year.

4-Month Perspective

During the four months of the current Iranian year that started on March 21, the number of home deals finalized in Tehran totaled 26,327. The figure was 49.9% down year-on-year.

In the same period, the average price of each square meter of a home in the capital stood at about 126.48 million rials ($1,045), signaling a year-on-year surge of 102.4% compared with the four months of last year.

Tenancy in Urban Areas

The central regulator also reports changes in tenancy prices in the capital and across the country.

According to CBI, the price of rented residential units in Tehran and across all urban areas in Iran increased by 24.8% and 22.5% respectively during the fourth month of the current year when compared with the similar month of last year.