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Increasing Housing Costs Burden Tehran Residents

Labourers work at the construction site of a building in Tehran
Labourers work at the construction site of a building in Tehran

Residential real estate prices in Tehran have risen 54.4 percent in the past 12 months, according to the Central Bank of Iran (CBI).

In its latest report on the capital city’s housing market, CBI also reported that the price per square meter for Tehran residential units increased to 69.7 million rials (roughly $1,600), compared with the same period last year.

The report, published on July 26, points out that housing prices have increased 7.1 percent per square meter, compared with the last Iranian calendar month (May 22-June 21).

The significant increase led to a 9.1 percent decrease in the number of residential units sold in the Iranian month of Tir (June 22-July 22) compared with the month before, Khordad (May 22-June 21). During the same period, 13,500 houses were sold across the city, which shows a 9 percent drop.

Furthermore, the report maintains that the number of apartments sold in Tehran, compared with last year shows a 7 percent drop.

The average price per square meter of residential units in the first quarter of the current Iranian calendar year (beginning March 21) soared to more than 62.5 million rials, which shows an increase of 41.3 percent compared with last year’s first quarter.

Out of Tehran’s 22 municipal districts, the most expensive residential units were in District One, with 151 million rials per square meter.

The report also says the cheapest residential units in the capital were in Tehran’s 18th District, with 31 million rials per square meter.

According to the CBI, rents also jumped in Tehran with a 13.6 percent increase (11 percent nationwide) in the Iranian month of Tir, compared with the same month the previous year.

The reasons behind the reported rise in prices are mainly that the national currency has significantly lost value against dollar. This has pushed many people to invest in real estate to protect their savings, economists say.

This can exert pressure on the middle and lower classes, whose incomes have not improved much. Recently, Radio Farda reported that an increasing number of people are forced to live in converted shipping containers in big cities.

Real estate and housing are one of the most important segments in Iran’s economy, which can mark the difference between growth and a recession. But the housing market itself depends on Iran’s oil revenues and, ultimately, the value of the rial.

While the official rate is 42,000 rials to the dollar, the rial has dropped to a record low of nearly 80,000 on the black market.

Nevertheless, a housing official said the recent meteoric rise in house prices, which far surpasses inflation, is not “real” and must decline.

Iraj Rahbar, vice president of the Association of Builders, said the rise in home prices is not related to the price hike in housing materials, which he said have registered average growth of 40 percent.

“House price growth in some districts of Tehran such as District 5, which registered growth of 40-50 percent, has been triggered by speculators, which is unreal and must definitely decline,” Rahbar was cited by Fars News Agency as saying.

He added that price growth in some districts such as 12 and 18, which had been about 3-5 percent or at the level of inflation -- currently hovering at around 8 percent -- could be considered normal.

Housing costs constitute the biggest chunk of families’ monthly expenses, making up roughly a third.

In a report published by Radio Farda in cooperation with Iran Open Data earlier this year, it is shown that in 2005 housing and utilities constituted 27 percent of a household’s expenses, while in 2015 it rose to 35 percent of monthly expenses.