Iran Housing Market: Sales Down, Rents Up

EghtesadOnline: The prolonged stagnation in Iran’s housing sector, which started in March 2012, has persisted through the summer of 2017 as housing deals across the country are declining while rents are outpacing the inflation rate.

News ID: ۷۷۷۹۸۹

29 July 2017

Housing deals in Iran and Tehran for the month ending July 22 stood at 49,805 and 16,156 which, according to the head of Tehran Association of Realtors, indicate a respective drop of 6.8% and 6.3% compared with the previous month.

“According to the Tehran Association of Realtors’ statistics, the number of sales during the period in the capital has also declined by 12.6% year-on-year,” Hesam Oqbaei was also quoted as saying by ISNA.

He enumerated the factors behind the drop in the country’s housing deals. “During the first month of the current Iranian year (started March 21), the market was half-closed. We had presidential election in the second month and the third month coincided with the holy month of Ramadan [which usually marks a trough in house purchases and rentals]. As a result, the market entered a stable phase and housing deals are predicted to go up by the end of the summer,” Financial Tribune quoted him as saying.

Rental Deals

Rental housing deals in the first month of summer (started June 22) have also declined in both Tehran and nationwide.

According to Oqbaei, in the month to July 22, rental housing deals in the capital reached 19,316, which indicate a drop of 9.1% and 18% compared with the month before and the same period of last year.

He added that the number of rental housing deals across the country in the period stood at 68,146, down by 5.4% compared with the previous month.

Oqbaei noted that according to statistics, rents in the new Iranian year did not increase by more than 7-10% compared to the previous year, but there could be special cases in which the jump was bigger.

Hamed Mazaherian, the deputy for housing and buildings with the Ministry of Roads and Urban Development, predicted an approximately 10-12% rise in rents in the current fiscal year, stressing that anything higher than that will be due to “the unreasonable requests of landlords”.

He noted that the 10-12% rise will be in line with the inflation rate that has recently gone back to double digits.

This is while local realtors in Tehran told Financial Tribune that the jump in rents has been much higher than what statistics indicate.

In northern districts of the city, the surge was more significant–up to 40% compared with the corresponding period of last year.

Financial Tribune’s field surveys in central and southern parts of the city revealed that rents have increased by 20-30%, which are still higher than the average increase announced by officials.

The unreasonable jump in rents in Tehran is happening while tenants are complaining about the percentage of the rise.

Fereydoun Hassanvand, the head of Majlis Energy Commission, said high rents are not exclusive to Tehran and people across the country are facing the same situation, ICANA reported.

“There is no balance between people’s incomes and rents, neither concerning the volume of housing loans nor home prices in the country. Therefore, managing home prices and rate of rents is an urgent matter,” he said.

Hassanvand added that in the wake of increasing demand for residential units, there should be stimulus packages for mass builders so they could use new technologies to build high-quality and low-price apartments.

“An effective supervision on the rate of rents, construction of rental apartments and allocation of loans for making the down payment for rental houses could be useful measures to control house rents,” he said.

The problem seems to be rooted in the fact that there is no legal entity to supervise the rate of rents or the price of apartments. Owners are totally in charge of determining the price of their property and there is no law to restrict them.

As the banks have reduced interest rates in the past few years, owners are asking for more rents and lower down payments that further increase the pressure on people.

Therefore, it is not a mystery that the surge in rents is mainly influenced by a profiteering mindset, with homeowners trying to reconfigure the rent and down payment in line with the bank interest rate.

The rise in rents in the past few years has been such that even if the volume of deals were to rise in the next few months, it would not be plausible for rents to experience another hike.