Iran Real Estate Perceived as Safe Haven for Investment

EghtesadOnline: The coronavirus has stoked concerns about losing one’s savings as more people entered the housing market in the month ending May 20 to register an 809.9% rise in home deals compared with the preceding month.

News ID: ۷۵۰۱۱۷

30 May 2020

Mehdi Soltan-Mohammadi, a housing expert, says people are turning to the housing market to protect their savings in the face of rising inflation.

“No one sees housing as a short-term consumer commodity. Even real consumers view purchasing a home as a long-term investment,” he said.

“In recent years, Iran’s population has continued to grow and migration from villages to cities has increased tremendously. Policies need to be directed toward encouraging supply. However, interference in markets, including housing market, which has the self-regulation function, is not advisable.”

Echoing the same sentiments, Ali Abdolalizadeh, former housing minister, said, “There is no such thing as speculative practice in the housing market: 85% of homes built in Iran are traded by real consumers. A small fraction of people engages in house flipping [buying a house or property with the intent of selling it for a profit] and that’s only observable about luxurious homes,” he was quoted as saying by the Persian-language daily Shahrvand.

“Price balance is more conspicuous in the housing market than any other market. The rise in home prices over five-to-10-year periods went harmoniously along with inflation peaks.”

A total of 11,310 homes were sold in the capital during the second month of the current fiscal year (April 20-May 20), registering an 809.9% rise compared with the preceding month. They saw a year-on-year decline of 6.7% compared with 12,128 deals in the corresponding month of last year.

Data published by Central Bank of Iran on its website also indicate that the average price of each square meter of a residential property in Tehran stood at 169.72 million rials ($981) during the month under review, showing a surge of 33.9% over last year’s same month as average prices were registered at 126.72 million rials ($720) then.

Home prices in the capital city increased by 11% compared to 152.95 million rials ($884) in the first month of the current year.

Property Deals

The CBI data also show that during the month ending May 20, newly-built residential properties up to five years old constituted the highest proportion of deals at 38.8% (or 4,391 deals), down by 2.2 percentage points compared with the same month of last year.

That lost share was added to homes six to 10 years old and those above 15 years. Homes with a lifespan of six to 10 years and 16 to 20 years accounted for 18.3% and 17.8% of total deals respectively.

The share of deals involving homes that were 11 to 15 years old also decreased from 12.6% of the total deals of last year’s same month to 12.5% this year. Homes above 20 years posted a share of 12.6% of total deals, compared with 11.1% of the same month of last year.

The distribution of dealt properties shows that among Tehran's 22 districts, District 5 grabbed the highest share of total deals at 15.2%. It was followed by districts 2 and 4 with a respective share of 9.6% and 8.3%.

All-in-all, 10 districts (five, two, four, 10, 14, eight, seven, 15, one and three) grabbed the lion's share of the deals at 72.8% with the remaining 12 districts holding a 27.2% share.

Among Tehran's 22 districts, District 1 registered the highest average home price of 339 million rials ($1,959) per square meter. District 18 offered the capital city's cheapest homes with an average per-square meter price of 78.5 million rials ($453). The aforesaid numbers show a respective increase of 30.3% and 32.8% YOY.

Residential units with an average price range of 120 million rials ($693) to 135 million rials ($780) per square meter were the most popular in Tehran during the Iranian month under review, as it grabbed an 8.8% share of all deals. They were followed by units priced at 90 million rials ($520) to 105 million rials ($606) per square meter with a share of 8.6%.

From the total number of deals, 56.9% belonged to homes cheaper than the average per-square meter price of the city (i.e. 169.72 million rials or $981).

Residential units with a floor area of 50-60 square meters registered the highest number of sales with a 15% share of total deals.

Units with an area of 60-70 square meters and 70-80 square meters came second and third with respective shares of 14.2% and 11.3% respectively. All-in-all, units with an area of less than 80 square meters had a 53.8% share of total deals.

CBI data further show Tehran’s homes worth between 4.5 billion rials ($26,011) and 6 billion rials ($34,682) were the most popular with a 10.6% share of total deals. These were followed by homes with a price tag of between 6 billion rials and 7.5 billion rials ($43,352) with a share of 10% of total deals.

Collectively, homes valued under 12 billion rials ($69,364) had a 51.9% share of total home deals in Tehran during the second month of the current year.

Two-Month Perspective and Urban Tenancy

During the two months of the current Iranian year that started on March 20, the number of home deals finalized in Tehran totaled 12,553, which shows a 19.3% decline year-on-year.

In the same period, the average price of each square meter of a home in the capital stood at 161.34 million rials ($932), signaling a YOY surge of 34.8% compared with the two months of last year.

The central regulator also reports changes to tenancy prices in the capital city and across urban areas.

According to CBI, the price of rented residential units in Tehran and across urban areas increased by 28.5% and 31.3% respectively during the second month of the current year compared with the similar month of last year.