Iran Housing Market Shifting Away From Capital

EghtesadOnline: Many of the people seeking to buy a home but can’t afford it in Tehran opt for one in surrounding cities.

News ID: ۷۵۰۲۲۲

13 June 2020

However, the price hikes of the past two years and the rise in demand for housing in other cities have narrowed the price gap of homes in Tehran and other large cities, according to a report by Persian newspaper Iran.

The latest official statistics on the average price of each square meter of residential floor area in the country pertain to the third quarter of the last fiscal year (Sept. 23-Dec. 21, 2019) published by the Statistical Center of Iran.

It put the average value of each square meter of residential floor area with a lifespan of 11 years at 41 million rials ($229).

According to data provided by the Ministry of Roads and Urban Development, the highest home price in provinces other than Tehran during last summer (June 22-Sept. 22, 2019) was registered in Isfahan with 40 million rials ($223) per square meter of residential floor area.

During the same quarter, the average price per square meter of residential floor area stood at 130 million rials ($726) in the capital city.

The cheapest home prices were posted in Kohgilouyeh-Boyerahmad Province with less than 20 million rials ($11). Price gaps such as these have directed a fraction of housing demand from Tehran to other cities. As the housing market registers negative growth in sales, other Iranian cities are experiencing relatively higher growth and demand, as homebuyers search for more affordable buying options.

Meanwhile, the buying power of home loans is higher in other Iranian provinces compared with Tehran. For example, they would cover 80% of the total price of a 60-meter residential property in Ardabil compared with less than 15% of the total price of the same home in Tehran despite the fact that loans offered in Tehran are higher in value than in other big cities.

The gap between home prices in Tehran and other cities was quite significant up until two years ago, says Farshid Pourhajat, the secretary of Builders Association—a guild establishment that works in coordination with policymakers in the housing sector.

“However, the depreciation of national currency left the biggest impact on home prices; pushing up the prices 192% during the past couple of years. Such a growth has occurred in almost all cities but was more conspicuous in Tehran and large cities,” he said.

“Over the years, the price of each square meter of residential properties in Tehran and other big cities was between $900 and $1,000. Only in the years ending March 2016 and 2017, prices fell below $900.”

Pourhajat believes that the growth in the number of renters is indicative of the significant rise in home prices in all cities.

Mahmoud Mahmoudzadeh, deputy housing minister, says price hikes in Tehran’s home prices are only observed in four to six provincial capitals as price growth rates in the country are not similar to Tehran’s.

“Close to 50% of the population of largest Iranian cities live in rented homes. The findings of the National Population and Housing Census in the year ending March 2017 show 31.7% of country’s homes and 43.5% of homes in Tehran are rented,” he said.

Tehran Real-Estate Market

Latest data released by the Central Bank of Iran show 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.

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.

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

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 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.

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.