Tehran Home Prices Continue to Deflate

EghtesadOnline: Tehran’s home prices keep on falling despite the rise in the number of deals in the month leading to Nov. 21 compared with the preceding month, the Planning and Housing Economy Office of the Ministry of Roads and Urban Development reported.

News ID: ۷۴۹۰۵۱

27 November 2019

The housing market in the capital had been experiencing skyrocketing prices until a few months ago, creating an inflating bubble that is seemingly about to subside gradually.

The number of home sales in Tehran reached 4,068 deals during the 30-day period between Oct. 23 and Nov. 21, indicating an increase of 15% (around 500 more deals) compared with the month before but a decline of 42% (around 3,000 fewer deals) over the same month of last year.

The average price of each square meter of a residential unit in Tehran stood at 126.17 million rials ($1,060) last month, about 1.5 million rials ($12) cheaper than the month before (a 1.3% decline month-on-month), Financial Tribune reported.

Home prices show an increase of 27.19% (35 million rials or $294) during the month under review when compared with the same month of last year.

Each square meter of residential units in Tehran was sold at an average of 91.85 million rials ($771) during the 30-day period to Nov. 21, 2018.

The distribution of deals shows that among Tehran's 22 districts, District 5 grabbed the highest share of total deals with 625 and District 19 had the smallest number of deals with only 23. Each square meter of a residential unit in District 5 was traded at an average of 145.41 million rials ($1,221) last month.

Among Tehran’s 22 districts, District 1 registered the highest average home prices at 249.86 million rials ($2,099) per square meter, whereas District 18 offered the capital city’s cheapest homes with average per-square meter prices standing at 58.36 million rials ($490).

Average home prices were on the decline in all districts of the capital city last month, except for districts 4, 7, 9, 12, 13, 14, 15, 18 and 19.

The highest monthly price rise—14 million rials ($117)—was registered for District 14 and the sharpest decline in home prices was posted for District 1 with 35 million rials ($294).

Mitigated Investment Risks

The modest decline in home prices in Tehran over the past couple of months is thanks to the economic stability and the mitigated risks associated with investment in both sectors of home sales and construction, Farshid Pourhajat, a housing expert said.

He also said that stability of parallel markets has directed demand toward the real-estate market, ISNA reported.

“Following the volatile market conditions of last year, created partly because of speculative activities, the housing market is recovering its equilibrium and that is encouraging more people to invest in real-estate development. There is hope of seeing home deals increase, if the market maintains its current economic stability. The fact that the new government-sponsored housing development project set high enrollment numbers in some provinces is emblematic of the continuing appeal of the housing market to many people,” he said.

The Roads and Urban Development Ministry’s National Housing Initiative is building 400,000 homes as per the so-called National Housing Initiative over two fiscal years (March 2019-2021).

The online enrollment for the project started on Nov. 9 and has reportedly received a good reception from potential home-buyers. For example, IRNA reported that residents of Qom Province filled their quota for registration in an hour since the National Housing Initiative’s website rollout.

Noting that the country is currently facing an estimated shortfall of four million residential units, Pourhajat said the government’s 400,000 homes would only meet 10% of the market demand and this will practically leave behind 90% of potential customers.

Asked about the impact of gasoline price hike on home prices, based on which the fuel was rationed and prices rose by at least 50%, Pourhajat said the main reason behind the current recession in the housing market is the people’s poor purchasing  power.

“Short-term fluctuations might occur in consumer prices when the price of a strategic product like gasoline increases. But in the housing sector, despite the potential demand, any form of price rise would deepen the recession. Therefore, I don’t see any growth in home prices in the near future,” he said.