No Price Jump Despite Housing Recovery

EghtesadOnline: Despite the recent buzz in the housing market, the growth in prices has so far been on a par with the inflation rate that hovers around 10%, the head of Tehran Association of Realtors announced.

News ID: ۷۷۹۰۳۴

06 September 2017

“Currently, there might be a few cases of prices rising above inflation, but the average does not crack that threshold,” Hesam Oqbaei was also quoted as saying by Fars News Agency.

“However, during the second half of the current fiscal year (started March 21), home prices might jump a little further.”

According to Oqbaei, the number of residential real-estate deals during the month ending August 22 reached 19,846, an unprecedented volume of sales since May 2014, which indicates an annualized growth of 27.4% while the figure marks an increase of 9.3% compared to the previous month, Financial Tribune reported.

This is while in the past three years, the average number of home sales in Tehran had not exceeded 13,000 per month.

Oqbaei noted that during the 10 days to September 3, the number of home sales and rental deals stood at 5,481 and 5,588 respectively. This has not notably changed compared to the previous year’s corresponding period but compared to its previous month, the growth has been acceptable.

“If the banking reforms had been implemented last year, we could have witnessed the housing sector’s recovery sooner. But despite the fact that the reforms are not being enforced completely, positive changes are emerging,” he said.

According to the Central Bank of Iran’s latest major directive, banks and credit institutions were obligated to refrain from paying high interests after September 2 and cap their interests on one-year deposits at the previously set 15% while paying a maximum interest of 10% to short-term deposits.

The realtor believes bank deposit rate cuts will direct a portion of investments toward the production sector, including housing.

“Rate cuts will increase people’s purchasing-power, prompt home construction and increase the sale of vacant houses,” he said.

“As we get closer to the maturity date of Housing Saving Accounts’ home loans, a more heated housing market is expected.”

Secretary of Builders Association Farshid Pourhajat noted that high interest rates are the main reason behind economic sluggishness.

“People’s low purchasing-power, the high risk of deals, shortage of home loans and banks’ high interest rates prolonged the housing market’s downturn,” he said.

Pourhajat added that there are 24 million families in the country while the number of residential units stands at 22.8 million, which indicates a 1.3 million deficit.

Minister of Roads and Urban Development Abbas Akhoundi had recently put the number of empty houses in the country at 2.58 million, saying that was up from 630,000 five years ago.

Akhoundi referred to the housing sector as “the most manipulated sector of the Iranian economy” and noted that while there are 24.19 million households and the country has 25.4 million homes, the housing sector is in shambles.

Responded to Akhoundi’s statements, Pourhajat said the existence of 2.5 million vacant homes highlights the fact that people’s purchasing power has declined. “The report, which says there are 2.5 million vacant homes, does not clarify where they are located. For instance, if the apartment is located in Tehran’s high-end districts, it is obvious that the owner has bought it as an investment, which is not unusual,” he said.