Small Homes in Tehran Exceed Housing Inflation

EghtesadOnline: Smaller homes in Tehran have experienced more significant price hikes compared to larger ones as demand for the former increases, a review of figures for the initial seven months of the current fiscal year that ended on Oct. 22 shows.

News ID: ۷۸۴۳۲۷

18 November 2018

According to the Persian economic daily Donya-e-Eqtesad, price changes across three groups of housing in Tehran based on the area of the home show that residential units with an area of 40 to 60 square meters—the first choice for first-time homebuyers in addition to speculators—have experienced the highest price jumps.

Among Tehran's 22 districts, 4 and 5 registered the highest demand and the largest number of home deals. This year, the two districts constitute about 25% of all home deals conducted in Tehran.

Small homes have been the most popular and pricy options in these two districts, according to Financial Tribune.

From the start of the current year (March 21) to Oct. 22, the average price of each square meter of residential units with a total area of 40 to 60 square meters jumped by 59% and 66% in districts 4 and 5 respectively.

This is while units with an area of 60 to 80 square meters experienced price surges of 51% and 60% respectively. Units with an area of 100 to 120 square meters saw prices grow by 45% and 54% in those districts respectively.

This is while the average price of each square meter of a home in Tehran during the seven months grew by 54%. At present, the average price of each square meter of a home across Tehran stands at 86 million rials ($717), compared to the 56 million rials ($467) at the start of the current year.

The rise in demand and prices of small residential units, especially in districts 4 and 5, has meant that these homes have turned into rare commodities. They have also become a major target for speculators that increased their activities to make a windfall profit in recent months on the back of fluctuating prices as a result of a declining national currency.

In District 5, for example, the average price of each square meter of a residential unit with a total area of 40 to 60 square meters reached 114.50 million rials ($954) during the seventh month of the current year. This shows a rise of 4% compared to the month before when the average price stood at 110.80 million rials ($923).

This category of housing has shown average monthly price increasing to 2% higher than those experienced by other housing categories.

The increase in demand and prices of smaller homes has also forced many to either move out of the city due to their dwindling purchasing power or seek homes in the southern parts of the city.

As a result, residential units with an area of 60 to 80 square meters, although with a much higher property age, have become more popular in southern Tehran.

These were followed by units with a total area of 60 to 80 square meters, which experienced the highest price jumps.

At present, residential units with a total area of 40 to 80 square meters take up more than half of the total number of deals conducted across Tehran.

But a reversal, at least partially, might be in order. Housing experts are now predicting that home prices are poised to take on a declining trajectory during the final months of the current year that ends on March 20, 2019.

When prices go down, they say, small homes will also witness changing patterns as their price hikes will be curbed significantly.