Iran Residential Real Estate Market Analysis Quarterly – Winter 2015
Jan, 2015
Table of Contents
1 Notes 4
2 An Introduction to the Real Estate Market, Persian Year 1378 (Year 2000) – Autumn 1393 (Year 2014) 4
3 The Share of Real Estate in Iran’s Economic Development in Spring 2014 5
4 Strengths, Weaknesses, Opportunities, and Threats of the Real Estate Market 7
5 The Share of Real Estate in Bank Facilities in Spring and Summer of 1393 (2014) 8
5.1 Review of the Facilities Provided by Bank Maskan in Spring and Summer 1393 (2014) 8
6 General Inflation Compared to Housing and Rental market Inflation 9
6.1 Inflation of Construction Components 10
6.1.1 Inflation in the Producer Price of Building Materials 11
6.1.2 Price Inflation of Construction Services 11
7 Review of Inflation in Rental Rates for Spring and Summer of 1393 (2014) 12
8 Review of the Price Index of Rental Housing and Its Fluctuations (All areas, metropolises, medium and smaller cities) 13
8.1 Rental Housing Price Index in Different Provinces of the Country 14
8.1.1 Rental Housing Price Index in Big Cities 14
8.1.2 Rental Housing Price Index in Medium Cities 15
8.1.3 Rental Housing Price Index in Small Cities 15
9 Latest Updates on the Price of Real Estate in Tehran – Mehr (October) and Aban (November) 1393 (2014) 16
10 Review of the Changes in the Price of Land, Apartment and Rent in the City of Tehran – Summer of 1393 (2014) 17
10.1 Review of Land Price Variations in the City of Tehran – Summer 1393 (2014) 18
10.2 Review of the Variations in the Price of Residential Apartment in Tehran – Summer 1393 (2014) 20
10.3 Review of the Rental Price Variations in the City of Tehran – Summer 1393 (2014) 21
11 Reasons behind the Fall of Real Estate Prices in Autumn 1393 (2014) 23
11.1 Review of the Transaction Statistics – Aban 1393 (November 2014) 23
12 Volume of Construction Licenses Issued in Tehran and All Urban Areas – Spring 1393 (2014) 23
12.1 The Area of Building Sub-structure Based on the Issued License – Spring 1393 (2014) 25
12.2 The Effect of License Issuance on the Real Estate Market 26
13 Capital Markets Alternative to Real Estate Investment 26
13.1 Forex Market 26
13.2 Gold and Gold Coins 27
13.3 The Stock Market 27
13.4 Money and Deposits Market 27
14 Comparing the Returns of Alternative Capital markets with the Real Estate Return 27
15 Review of the Private Sector Investments in Construction Business – Spring 1393 (2014) 28
16 Real Estate Policy Focused on Support of Supply and Support of Demand 30
16.1 Savings Fund 30
16.2 Raising the Loan Ceiling 31
16.3 Real Estate Leasing 31
16.4 Allocated Subsidy in 1393 (2014) 31
17 Forecast for Real Estate Market in winter 1393 (2015) 32
17.1 Rental and Lien Market 32
17.2 The Number of Transactions 32
17.3 Forecast for Selling and Buying Prices 33
18 The Effects of the Nuclear Negotiations on Real Estate Market 34
18.1 Short-term 34
18.2 Long-term 34
The real estate sector, as one the most important sectors in Iran’s economy, involves a considerable amount of the national wealth and revenues.
The historical trend of prices within the housing sector reflects the periodical fluctuations and recessions of this sector. Due to its sensitive role in the economy of Iran, the real estate market has always been at the center of attention for policy makers, producers and investors.
The analyses show that the stagnation of the housing market began in 1387 (2009) and continued until 1389 (2011). The stasis in this period brought a relative calm to the market and lowered the real price of housing. Since late 1389 (2011), real estate prices climbed slowly and plateaued at the end of 1391 (March 2013).
During the past year, the real price of housing continued to decline. The dominance of a relative stability over the relative prices in this period pushed down the real price of real estate. Concurrently, in the production sector (issuance of construction licenses) and in the transactions (volume of real estate purchases and sale deals), a downward trend has been registered.
In the first three months of spring 1393 (2014), the issuance of construction licenses in the country fell by 30 percent as compared to the same period last year. This decline has been 50 percent for Tehran. On the other hand, the volume of real estate deals in the metropolitan Tehran, which is considered an indicator of the whole country, shows that the volume of real estate deals has experienced a 13-percent drop in Aban 1393 (November 2014) as compared to the preceding month. The volume of deals, buying and selling, rentals, and pre-sales in Aban (November) have all declined by 11, 13 and 0.9 percent, respectively.
These conditions shifted the concerns of policy makers from the dramatic rise of prices in housing (caused by long-standing, general inflation) to the diminishing power of households in purchasing of proper housing and inconsistencies between constructed housing and the demands of the middle and lower socioeconomic classes. Furthermore, based on previous experiences, the supply side of the housing market has always complained about the lack of access to financial resources, delay in credit provision, and utter reliance on the banking system. As long as the lack of access to financial resources (which is the main hurdle in the development of this sector) is not taken care of, real estate economics will undoubtedly suffer further hardships.
Generally, the real estate market is facing a non-inflationary recession (as a result of economic stagnation), more supply in the housing market than demand, weakness of the capital market in provision of financial assistance to ineffective demanders of housing.
According to statistical documents of the Central Bank, the economic growth of the country, including the sale of oil, in spring 1393 (2014) reached 4.6 percent. Without oil this number decreases to 4.4 percent. Furthermore, the country’s GDP (Gross Domestic Product), according to their base price and 1383 (2005) prices, rose from IRR 459.252 trillion in spring 1392 (2013) to IRR 480.491 trillion in spring 1393 (2014), which is indicative of a 4.6-percent economic growth ...
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