Ever-increasing real estate prices in Tehran are showing signs of decline and may be finally catching up with U.S. sanctions and the abysmal economic conditions in the country.
Apartments on offer in the northern residential areas of the capital go weeks before any offer and sellers are forced to reduce prices, according to government -run Iranian Students’ News Agency, ISNA.
As U.S. sanctions were reimposed on Iran in 2018 and the economy entered a serious recession, the national currency began a steep fall. People started to panic over how to protect their cash. First, they flocked to currency dealers to exchange their Iranian rials to U.S. dollars and other hard currencies. But by this time last year, it became difficult to buy dollars as the government clamped down on currency traders.
In an odd way this actually helped real estate prices, as people with capital fled from the national currency and tried to find a safer haven for their money.
The Central Bank of Tehran reported last September that in one year Tehran residential prices had risen 74%. But in reality, real-estate values just kept up with the devaluation of the rial and did not increase in real if calculated in dollars.
Enough people were investing in real estate to boost prices in local currency, which protected homeowners and investors from spiraling devaluation and the resulting inflation.
Now, that trend seems to be coming to an end, especially in case of apartments larger than 80 square meters or 880 sq feet are harder to sell, since they are more expensive.
ISNA has focused on actual sales and in one typical area of northern Tehran the selling price per meter for an 80-meter apartment is around $1,200 per square meter or $110 per square foot. Compared with last year September, prices have doubled further but sales have slowed down and buyers refuse to pay asking prices, forcing sellers to keep lowering prices.
The rising costs of housing alarmed politicians who were warning people in early June to be careful with speculation.
One real-estate expert told ISNA that mortgages are not easier to get and demand is not as high as before. Politicians do not need to advise people to be careful as the market is cooling down.
The head of real estate consultants’ association has told ISNA that prices are down 8-18 percent in five areas of Tehran, but this decline is still too little to stimulate sales, given the huge price rises in the past 18 months. Many buyers find the market too high and stay out.
The IMF, World Bank and local economists forecast up to six percent contraction in the Iranian economy this year. Many industrial units have stopped operations or considerably have scaled down. Workers are not paid regularly and labor protests have become a daily occurrence.