50% increase in housing prices

According to the news site "Asr Sakhtman" quoted by Jam News, for a large segment of Iranians, if once it was a goal for the not-so-distant future, it has become a distant dream in recent years. In other words, after a period of emotional growth in prices, the boom in this market gave way to stagnation, although this stagnation did not cause a drop in prices. In this way, the housing market has long been content with single buyers and the demand queue has become a memory. On the other hand, sellers either prefer to wait for the time being in the hope of price growth or, if they are in a hurry to convert their property into cash, they do not find customers.
If you go to a real estate agency, the agents have a long list of sellers waiting for a buyer, but the wait can last for months. If you are a buyer, the first question the agent will ask is, "Can't you raise your purchase budget?"

The result is that most buyers currently have limited budgets and are hoping for a drop in prices, while sellers are unwilling to back down, hoping that prosperity will soon return to the market.

Meanwhile, Central Bank statistics indicate an increase in the number and volume of transactions in the past months of the year, which, of course, may not seem so strange considering the spring and summer shopping season.

But is the housing market really on the verge of a boom season after a long time, meaning that demand for purchases has increased or have sellers retreated a bit from their positions?

Everyone is looking for a home.
Apart from the story of buying and selling, the rental and mortgage market has also been in the news these days. The decrease in bank interest rates has forced many landlords to reduce their mortgage amount and increase their monthly rent, creating new problems for tenants. This is while, by a rough calculation, a decrease in interest rates should lead to a decrease in rent equivalent to every million rials of mortgage.

With this in mind, predicting the future of the housing market has become a concern for many people, and it is not clear exactly where this path will lead.

Hesam Aqbaei, head of the Real Estate Consultants Union, hopes that the shadow of recession will recede from the housing market in the second half of this year and at the latest next year, although developments in the rental market will probably not be favorable, at least for tenants.

He believes that the formula of 30,000 tomans of monthly rent in exchange for a mortgage of one million tomans has become a custom among people and will not change anytime soon with circulars and regulations because, first, the hypothesis that landlords deposit the Qard-ol-Hasanah amounts they receive from tenants with the bank is not very provable, and second, any change must be made at the appropriate time.

The impact of interest rate cuts will reach the housing market next year.
According to him, statistics over the past 50 years show that those who wanted to rent either had an income-generating approach or did so to make a living. Therefore, landlords were more inclined to receive rent than to receive advance payment, and in the last few years, calculating bank interest in rental contracts was introduced, and such behavior was not seen before. On the other hand, those who mortgage their houses and receive advance payment are mainly people who do not have enough money to buy a house, so they finance part of the transaction price through receiving a mortgage. However, the fact that an owner mortgages his house and puts the money in the bank and receives the interest is so few and limited that it cannot be considered as a criterion and example for the growth of rent.

Aqabaei says: "Given the resilient nature of the housing market, the impact of movements in other economic sectors, such as bank interest rates, on the rental market is long-term, and it will take at least a year for us to feel the impact of the reduction in bank interest rates on the housing market, so we should not make hasty decisions before we see this impact." Another point is that the reduction in bank interest rates coincides with the main time for tenants to move, which has increased sensitivity in this regard. In other words, perhaps if the reduction in interest rates had occurred in the second half of the year, there would not have been such sensitivity in the housing market and it would not have caused concerns for tenants and owners.

Despite all that has been said, at least the Ministry of Roads and Urban Development is hopeful about the future of this market, both in terms of sales and rentals.

The boom is coming back.
Hamed Mazaherian, deputy minister of the ministry, says that housing prices have decreased by 30% compared to three years ago, and the housing market is expected to gradually recover without any sudden shocks.

According to him, those who had put their money in the bank for savings have started thinking about investing in other areas with the decrease in bank interest rates. This is while housing prices have increased by 5% compared to a few months ago, but this 5% increase in housing prices is lower than the inflation rate.

Regarding the calculation of one million, equivalent to 30,000 tomans in the rent, Mazaherian also says that the ministry does not believe in taking a punitive approach to the housing market, and that it is not possible to review each contract individually. Thus, until landlords recognize the reduction in interest rates, the reduction in the calculation of the rent based on one million, equivalent to 30,000 tomans, will not be implemented.

Thus, the power in the housing market continues to be in the hands of landlords, whether they are sellers or those who intend to rent.

Declining purchasing power increased demand for rentals
Hassan Mohtasham, head of the Tehran Province Housing and Construction Association, also believes that the reduction in bank interest rates currently has no meaningful relationship with rental rates, and that determining rental rates is not in the government's hands and is a function of the free economy, i.e. supply and demand.

He emphasized: "Given the prevailing recession in housing transactions, which indicates a decrease in people's purchasing power, the demand for renting will increase, and the increase in demand for housing through rental will naturally lead to an increase in rental rates."

The head of the Tehran Province Housing Association stated that according to statistics, 850,000 marriages are registered annually, and that the amount of housing produced will not be sufficient to meet this need. He added: "Therefore, these people turn to renting to meet their needs, and this leads to an increase in housing rents."

This housing market expert reminded: The formula of reducing the monthly rent by 30,000 tomans in exchange for converting the mortgage to 1 million tomans does not make economic sense for the owner, considering the market price of the property. Therefore, in the best case scenario, the owner and tenant may reach an agreement to reduce the rent by 3%, considering the 3% decrease in the market interest rate.

Stating that the housing market is in its fourth year of recession, he continued: "Given the lifting of sanctions and the transactions between Iran and other countries, we will witness a boom in the housing market by the end of this year, and consequently a gentle increase in prices."

In another part of his remarks, Mohtasham noted: "At the same time as the housing market booms, if the government prevents capital from flooding the housing market, we will witness a tsunami of price increases in the market, with prices expected to increase by over 50 percent."

He noted: "Over the past three years, the housing market has been in recession, and this recession continues, and the housing market has faced an accumulation of goods. This has also called into question employment, and many workers in this field have faced unemployment."

The government cannot control the rental market.
Iraj Rahbar, a member of the Iranian Housing and Construction Association, also said in an interview with "Omid Iranians" regarding the mandatory reduction of rent rates in proportion to the interest rate on bank deposits in the housing market: "Given that rent rates in the housing market are determined in proportion to supply and demand, as a result, mandatory determination of rent rates in the market cannot be responsible."

Stating that the owner and tenant must reach an agreement on the rental rate, he continued: "Due to the decrease in housing supply, landlords increase rates in proportion to market demand."

A member of the Iranian Housing and Construction Association stated that rental rates have an inverse relationship with market recession, and continued: "If the housing market returns to prosperity, we will see a decrease in rental rates in the market."

Referring to the increase in rent rates in the market, this housing market expert also noted: "Rent rates have increased by an average of 15 to 20 percent in the market this year. This is while landlords increase rent rates in the market every year based on demand in different regions."

He added: "The psychological atmosphere that currently exists in the country, especially in the metropolises, indicates that housing will become more expensive in the future, and for this reason, people are encouraged to rent housing, because experience has shown that as we get closer to school closures, housing rents also experience upward price growth."

Source: Parsik