Average Home Price at $584 per sqm

EghtesadOnline: The average price of each square meter of a residential property in Iran stood at 152 million rials ($584) in the month ending Nov. 20, says Mahmoud Mahmoudzadeh, the head of Housing Department of the Ministry of Roads and Urban Development.

News ID: ۷۵۱۷۰۵

14 December 2020

“In summer, the department decided to stop publishing statistics regarding Tehran’s real-estate market because it believes having the average home price in Tehran as a reference would affect prices in other provinces whereas prices in the cities of a province should be compared to the capital city of that province [and not Tehran],” he was quoted as saying by Mehr News Agency.

“At present, statistics on home deals of all provincial capital cities have been prepared and the average price of each square meter of a residential property in 25 provincial capital cities is below 100 million rials [$384]. The median home price of nine provincial capital cities is less than 50 million rials [$192]) and only in Tehran and Ahvaz, the average price of each square meter of home exceeds 200 million rials [$769]. Tehran home prices stood at 278 million rials [$1,069] and Ahvaz at 235 million rials [$903] per square meter during the month ending Nov. 20.”

Mahmoudzadeh said high demand has driven up home prices in the southern city of Ahvaz; it has become popular with foreign national buyers in recent months, though it was not an expensive city in the past.

The most expensive city in Iran, in terms of home prices, was Tehran and the cheapest was Yasuj with 32 million rials ($123) per square meter last month.

He put the median home price per square meter in Shiraz at 114 million rials ($438); Isfahan at 111 million rials ($426); Ilam at 40 million rials ($153); Birjand at 42 million rials ($161); Bojnurd at 45 million rials ($173); Kermanshah at 46 million rials ($177); and Arak and Zanjan at above 100 million rials ($384).

On home prices in Tehran in dollar term, the official said, “The highest average home price in dollar term in Tehran over the past 15 years was registered in the year ending March 2009 with $2,244 per square meter. This comes as the average price of each square meter of a residential property in Tehran stood at $1,051 at the rate of 250,000 rials per US dollar last month, i.e., half the price it was in the year ending March 2009.”

Noting that housing expenses accounted for 36% of households’ budget in the year ending March 2020, Mahmoudzadeh said, “Home prices increased from 12 million rials [$46] in the year ending March 2010 to 278 million rials last month.”

Currency Appreciation and Real-Estate Prices

Prices of construction materials are pegged to the value of US dollar but the decrease in foreign currency conversion rate won’t necessarily lead to the fall in the prices of building materials, says Alireza Sarhadi, a housing analyst.

“Fresh analyses of real-estate market show a decline in home prices following the appreciation of the rial against the dollar. However, the impact of the decrease in the value of dollar would manifest itself in the form of recession in the real-estate market. During the recession, it is the number of deals that decreases rather than prices; real sellers or investors who need their money would compromise for low prices,” he was quoted as saying by the news outlet of Tehran Chamber of Commerce, Industries, Mines and Agriculture.

“Economic stability is the key factor that can pull the housing market out of recession. When construction maintains its growth and real-estate development is viewed as a career on its own, buying and selling of land would improve. When there is economic stability, builders won’t worry about whether they would be capable of selling their properties. Under current conditions and given the low level of predictability of economic changes, builders are reluctant to invest in the housing market.”

Hossein Vakili, an economic analyst, told IRIB News the housing market is influenced by the general economic climate and lack of investor trust at the micro- and macro-economic level.

“The housing market has been affected by irrational fluctuations, regulations and pricings just like stock, forex and gold coin markets. Mismanagement is to blame for the turmoil that swept the housing market, as well as related markets such as metals, cement and steel markets over the past year. As such, home prices increased by 120% in a single year,” he said.

“The rise in prices was expected, considering the 7.5-fold increase in money supply from 4,000 trillion rials in the year ending March 2014 to 30,000 trillion rials [today].”

The housing market will see positive developments if Iran’s international relations improve, as the rush for buying will turn into a rush for selling and prices will drop, Vakili concluded.

10% Decline in Prices Within 3 Months

Home prices have declined by 10% over the past three weeks and the increase in supply has put a downward pressure on prices, Mostafa Qoli-Khosravi, the head of Tehran Realtors Association, said recently.

“The Iranian month ending Nov. 20 saw 5,072 home deals concluded in Tehran, indicating a 48% decrease compared with the previous month but a 12% growth compared with the same month of last year. The number of rental agreements in Tehran registered at the state-run Tenement Management Information System [operated by the Ministry of Roads and Urban Development] stood at 16,583, registering a 10% decline month-on-month but a 66% increase year-on-year,” he was quoted as saying by IRNA.

“Over 44,339 sale contracts were finalized across the country during the month under review, indicating a 31% decrease month-on-month but a 67% growth year-on-year. A total of 133,096 lease agreements were signed across the country, during the month under review, posting a 9% decline month-on-month but a 273% rise year-on-year.”

Qoli-Khosravi said the decline in the number of deals is indicative of real-estate buyers’ expectation of future house-price depreciation and sellers’ resistance to reduce.

“The country’s economic prospects are positive; the foreign currency exchange rate is declining and this has led to a decline in asking home prices. Residential properties with inflated prices don’t have any buyers,” he said.

CBI Report

Latest data published by the Central Bank of Iran show a total of 4,466 homes were sold in the capital during the eighth month of the current fiscal (Oct. 22-Nov. 20), registering a 48.4% decline compared with the preceding month but a 9.9% growth compared with the same month of last year.

The average price of each square meter of a residential property in Tehran stood at 271.93 million rials (over $1,045) during the month under review, showing a surge of 118.2% over last year’s same month as average prices were registered at 124.63 million rials ($480) then. Home prices in the capital city increased by 1.8% compared to 267.2 million rials ($1,027) in the seventh month of the current year.

During the first eight months of the current Iranian year that started on March 20, the number of home deals finalized in Tehran totaled 68,043, which shows a 70.7% rise year-on-year.

In the same period, the average price of each square meter of a home in the capital stood at 216.79 million rials ($833), signaling a YOY surge of 70.9% compared with the eight months of last year.

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

According to CBI, the price of rented residential units in Tehran and across urban areas increased by 28.7% and 31.9% respectively during the eighth month of the current year compared with the similar month of last year.