Surge in Tehran Home Prices Continues While Deals Fall: H1 2018

EghtesadOnline: Home prices in Tehran soared while the number of property deals significantly declined during the sixth month of the current Iranian year that ended on Aug. 22, the Central Bank of Iran announced.

News ID: ۷۸۴۱۰۰

30 September 2018

This means that the trend of surging prices, coupled with falling property deals in the capital, has continued for the fourth month in a row, reinforcing the possibility of a nationwide housing recession in the foreseeable future since Tehran accounts for two-thirds to half of all property deals in Iran.

Data published by the CBI on its official news website on Thursday indicate that only 10,335 home deals were conducted in the capital during the sixth month of the current fiscal year, signaling a year-on-year decrease of 33.5% compared with the 15,545 deals in the corresponding period of last year. Compared to the fifth month of the current year, the number of property deals declined by 13.9%.

On the other hand, the average price of each square meter of a residential unit in Tehran stood at about 80.95 million rials ($491 based on the Sana rate of 164,771 rials to the US dollar on Sept. 28) during the sixth month, showing a massive annual surge of 74.1%, as average prices registered 46.50 million rials ($282) last year, Financial Tribune reported.

Home prices in the capital grew by 9.4% compared to the 73.99 million rials ($449) in the fifth month of the current year.

The trend of rising prices, in tandem with the falling number of deals in Tehran, emerged from the third month of the current year that ended on June 21, when prices grew by 45.8% and deals fell by 3.1% on an annual basis respectively. It has only exacerbated in the following months.

> Details of Property Deals

During the sixth month of the current year, newly-built residential units that are up to 5 years old grabbed the highest share of the total of 10,335 deals at 43.8%, down by 3.7% compared with the same month of last year. That lost share was added to units of ages 11 to 15 that registered a 14.9% share of total deals, but still trailed behind units of ages six to 10 and 16 to 20 with a respective share of 15.3% and 15.2%.

Homes more than 20 years old had a 10.8% share, the lowest.

The distribution of dealt properties shows that among Tehran's 22 districts, District 5 once again grabbed the highest share of total deals at 15.9%. It was followed by districts 4 and 2 with a respective share of 9.6% and 9.1%.

All-in-all, 10 districts grabbed the lion's share of the deals at 74.1%, with the remaining 12 districts holding a 25.9% share.

Once again, District 5 registered the highest average annual price growth at a whopping 92.1% during the sixth month of the current year. District 12 saw the lowest year-on-year average price hike at 36.2%.

Among Tehran's 22 districts, the northernmost affluent District 1 again registered the highest average home price of 176 million rials ($1,069) per square meter. District 18 was the capital's cheapest with an average per square meter price of 35.4 million rials ($214). These numbers show a respective increase of 75.3% and 55%.

> Smaller, Cheaper Homes Preferred

CBI figures show that Tehran's residents again favored smaller and cheaper homes, as their purchasing power has significantly dwindled in recent months due to massive price hikes caused by a currency crisis.

Relatively cheap residential units with an average price range of 50 million rials ($303) to 60 million rials ($364) per square meter were the most popular in Tehran during the sixth month, as they garnered a 10.5% share of all deals. They were followed by units priced at 40 million rials ($242) to 50 million rials and 60 million rials to 70 million rials ($424) per square meter with a respective share of 10% and 9.4%. From the total number of deals, 54% pertained to homes cheaper than the average per square meter price of the city.

Residential units with an area of 60 to 70 square meters registered the highest number of deals with a 14.8% share of total deals. Units with an area of 50 to 60 square meters and 70 to 80 square meters came second and third with shares of 13.8% and 12.1% respectively.

On the whole, units with an area of less than 80 square meters had a 53.4% share of total deals.

CBI data further show that Tehran's homes worth between 2 billion rials ($12,138) to 3 billion rials ($18,207) were the most popular with a 13.6% share of the total deals. Units with price tags of between 3 billion rials to 4 billion rials ($24,276) and between 1 billion rials ($6,069) to 2 billion rials came next with a respective share of 11.2% and 9.5% of total deals.

Collectively, residential units valued at less than 6 billion rials ($36,414) had a 51.4% share of total home deals in Tehran during the sixth month of the current year.

During the first half of the current year, the number of home deals finalized in Tehran totaled 74,894. This figure was down 12.1% compared with the first six months of the last fiscal year (ended March 20, 2018).

In the same period, the average price of each square meter of a house in the capital stood at about 67.47 million rials ($409), signaling a year-on-year surge of 50.5% compared with the first half of last year.

> Tenancy in Urban Areas

The central regulator also announced changes to tenancy prices in the capital and across the country.

According to CBI, the price of rented residential units in Tehran and across all urban areas of Iran increased by 14.6% and 12.4%respectively during the sixth month of the current year when compared to the similar period of last year and the fifth month of the current year.

The share of housing expenses, including rent, from the expenditure basket of Iranian households stands at 33.1%.