An Overview of the Housing Market in Iran

The fluctuations in the number of transactions and housing prices in recent years—especially influenced by seasonal factors and even psychological and unstable factors—have been common phenomena. Nevertheless, some officials and stakeholders in the housing market, both governmental and private, have occasionally published statistics indicating a positive trend in the housing market, considering it a sign of market prosperity. However, market activity has again declined shortly after. According to the latest report from the Central Bank's public relations, the average price of buying and selling one square meter of residential units sold in September through real estate agencies in Tehran was 47.6 million rials, reflecting a 9.7% increase compared to the same month last year. Additionally, the number of residential apartment transactions in Tehran in September 1396 reached 15,500 units, indicating a 9.2% increase compared to the same month last year. Simultaneously, the Central Bank reports an 8.4% increase in September 1396 compared to the same month last year. A comparison of inflation in the housing sector and the increase in housing prices in Tehran shows that the increase in housing prices in Tehran is slightly above the average inflation rate in Iran. However, it should not be forgotten that these statistics pertain only to one month, specifically September. Therefore, the seasonal impact or the influence of unstable factors—such as the effect of bank deposits entering the housing market—cannot be ruled out regarding the increase in the number and price of housing. An examination of the Central Bank's statistics in previous months indicates that the highest transactions pertain to residential units priced below the average price per square meter in Tehran. In other words, the demand for cheaper and smaller houses has the highest ratio. As the price per square meter of residential units increases, transactions have also decreased. Therefore, the limited purchasing power of households remains a serious obstacle to widespread and sustainable prosperity in the housing market. The prosperity of the housing market is conditional on increasing public purchasing power, especially for lower-income groups. The deep recession in Iran's housing market is the result of factors that have been evident for nearly six years and are still present. The most important factor among these is the decrease in demand due to reduced purchasing power and the bleak outlook for economic recovery, which has severely contracted the housing market. As observed, the housing market is heterogeneous and geographically dispersed, and unlike the stock market, price fluctuations do not affect all related components. Therefore, although the housing market statistics are limited to Tehran, it cannot be denied that this market is more or less indicative of the housing market in Iran. What factors are effective in increasing demand in the housing market? Since housing has a dual nature of consumption-investment, the factors affecting it are a combination of factors increasing demand for consumer and investment goods. Thus, as income and liquid assets in society increase, demand rises. Simultaneously, whenever the return on investment in the housing sector increases, it is natural that demand for investment in this sector also rises. Additionally, rising rental prices also contribute to increasing housing prices. Furthermore, from the consumer's perspective, housing is considered an expensive commodity, and from the investor's perspective, it deals with bulk investments, which is why both demand and supply are sensitive to political and economic risks and shocks. Therefore, the condition for the continued growth of transactions and the prevalence of transactions in it depends on political and economic stability and policymaking. If the real purchasing power of households increases based on a combination of increased employment and reduced inflation rates, and there are no political and economic shocks, then it can be expected that housing transactions will grow, and demand for more expensive and larger houses will also show growth. Over the past two decades, the Iranian economy has experienced severe fluctuations in the housing market. Periods of boom and severe recession in the housing sector have caused significant price fluctuations. Although the housing market crisis is influenced by commercial cycles—booms and recessions—it also affects them or intensifies them. Following the economic recession in Iran, which resulted from reduced government foreign revenues and sanctions, demand for housing also decreased. In a sense, it can be claimed that the prosperity of the Iranian housing market is conditional on oil prosperity and the government's expansionary policies in injecting money and credit through banks into the housing market. Does the increase in the number of transactions and housing prices signify a sustainable boom in the Iranian housing market? The current increase in housing prices and its passage above the average general inflation rate, along with the increase in transactions in the housing market, indicates the activation of the housing market in the last month of summer and at the beginning of the school year. However, this does not mean a sustainable and widespread boom in this market across Iran and all regions. The statistics pertain only to one month of the summer season—specifically the active season of the Tehran housing market. It should not be forgotten that the Tehran housing market has historically always been one of the most active housing markets in Iran, displaying the highest price inflation. The housing market consists of a chain that begins with the production of materials and supplies and includes sectors such as housing production, real estate, and sales. Alongside this sector, related activities in the banking sphere are also observable. One can say that the housing market has reached sustainable prosperity when the entire chain, composed of the real sector—reflected in variables such as production, employment, and marketing—and the virtual sector, such as loans and banking facilities, becomes active and continues over a longer period. Therefore, it remains to be seen whether the positive trend of variables related to the housing market will continue.