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Iran's Housing Market Shows Early Signs Of Rising Prices

A general view of housing complexes in northwestern Tehran.

Iran’s Central Bank reported on Monday, November 27, that sale of residential units in Tehran increased by 18.5% compared to a year ago, and home prices increased by an average of 11%.

From October 21 to November 21, which is the Iranian month of Aban, 14,800 residential units were sold in tehran, which is 18.5% higher than the corresponding period last year.

The Central Bank also reported that the price of one square meter of housing, on average, was around $1,200 – approximately $110 per square foot – which was 11% higher than last year.

In contrast, housing prices in Istanbul, Turkey is almost 50% higher than in Tehran, with almost $1,800 on average per square meter.

In the eight months since March 21, housing sales witnessed a 7.7% increase compared to the same period last year. In Tehran, 113,800 units were sold this year. Prices also rose to the tune of 7.1% in the same period.

Real estate and housing is one of the most important segments in Iran’s economy, which can make the difference between growth or recession. But the housing market itself depends on Iran’s oil revenues.

In the past few years, as sanctions and low oil prices hurt the Iranian economy, housing witnessed its own recession and government efforts to revive it has had limited impact.

The Central Bank report about rising prices comes as a surprise. The chairman of parliament’s Economic Commission, Mohammad Reza Pour-Mohammadi had said that the housing market is not expected to rise in the near future.

He believes that the housing slow-down is related to the general economic situation in the country, which can only change if oil income rises. Oil income, is the main source of investment for the housing market, he says.

A member of the builders’ association in Iran has said that the housing recession is related to government policies of controlling inflation, which means less liquidity made available.

Ahamd Alavi, an Iranian economist in Euope who contributes to Radio Farda wrote last month that the housing market depends both on oil income and also government money supply policies.

The reasons behind the reported rise in prices are not clear yet.It is possible that after an almost six-year recession in the sector there is finally some room for growth.

It is also possible that fears about the Iranian currency losing its value pushes people to invest in real estate to protect their savings.

According to the Central Bank, rents have also jumped in Tehran with a 9.6% increase and in other cities 8.5% compared to last year.

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.

Housing costs constitute the biggest chunk of a family’s monthly expenses.

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% of a household’s expenses, while in 2015 it rose to 35% of monthly expenses.