Soaring House Prices in Tehran Unreal

EghtesadOnline: A housing official said the recent meteoric rise in house prices in some of the districts of Tehran, which far surpassed the inflation, are not “real” and must decline.

News ID: ۷۸۲۷۹۹

03 June 2018

Iraj Rahbar, vice president of the Association of Builders, said the rise in home prices are not related to the price hike in housing materials, which he said have registered an average growth of 40%.

“House price growth in some districts of Tehran such as District 5, which registered a growth of 40-50%, has been triggered by speculators, which is unreal and must definitely decline,” Rahbar was quoted as saying by Fars News Agency.

He added that price growths in some districts such as 12 and 18, which had been about 3-5% or at the level of inflation–currently hovering at around 8%–could be considered normal, Financial Tribune reported.

The latest report by the Central Bank of Iran indicates that the number of home sales in Tehran during the second month of the current year ending May 21 reached 19,100, signaling a respective increase of 278.7% and 16.7% when compared with the previous month and the same month of last year.

During the period, the average price of 1 square meter of a residential unit in Tehran reached 59.8 million rials ($1,420), which was higher by 8.2% and 34.8% when compared with the previous month and the same month of last year.

Of the 22 districts of Tehran, District 5 once again registered the highest price jump at a hefty 53.5% while the lowest hike belonged to District 16 at 12.3%.

The rise in property prices came around the same time as US President Donald Trump began to threaten to exit the Iran nuclear deal, which the country had signed with world powers in 2015.

The uncertainty around the Joint Comprehensive Plan of Action, as the agreement is formally known–caused a drop in rial, the Iranian currency, which also sparked a rush toward safe-haven assets such as the property and gold markets.

Rahbar referred to the multi-year recession in the housing market and its signs of boom in recent months and said in order to instill housing sector recovery, the purchasing power of home buyers should increase.

Stressing that a boom is evident in big cities, the official noted that the government can also come up with ways to help the sector in less-developed areas.

Rahbar said Housing Savings Account is one of the schemes aimed at helping the lower middle classes buy homes.

HSA is an initiative mainly aimed at first-time prospective homeowners, which requires applicants to make down payments ranging from 400 million rials ($9,523) to 800 million rials ($19,047) and wait for a year to receive double that amount.