As we had reviewed in our previous articles, the housing market is one of the most influential industries in Iran’s economy so flourishing in this industry leads to better business sitution in the housing market’s downstream industries such as steel and cement.
Based on many researches, the key variable which has great effect on housing market is population growth, because the growth in population leads to growth in housing demand. The Iran’s population were around 35 million in the first year after Islamic revolution which has increased to 81 million this year according to World Bank. This occurrence causes a boom in the housing market and the price of houses in Iran increased significantly, also the inflation rate have dramatic influence on the price of houses in Iran, for instance the price of houses increased around 300 percent in just three years from 2011 until 2013. However, the housing market faces new challenges after 2013 such as the inflation rate which has decreased drastically from more than 40 percent to 10 percent and for the first time the housing market faces supply surplus. These two elements cause recession in housing market which lasts until now.
In addition, financing is another problem for real estate’s potential buyers. The banking system of Iran buckling with wide range of problems these years so people facing a lot of problems for borrowing money from banks. Home loans in Iran mainly offered by Maskan Bank, leasing companies couldn’t take part in this market because of their low financial strength. In addition, mortgage haven’t been used widely in Iran’s debt market. These factors restrict loan applicants and provoke recession in housing market.
After three years of recession, housing market is facing new opportunities. Housing transactions grew slowly specially in houses with affordable prices during the first half of new Persian calendar year (1396). In addition, the price of real estates increased a little during mentioned period. These occurrences indicate that the type of demand have been changed. So, if the supply reacts appropriately to these changes, the recession will eradicate from housing market.
To conclude, if the economic decision makers can manage limiting factors of housing market, the market will be improved. In addition, paying attention to people with low income could reinforce demand. It seems that according to macroeconomic conditions, there is no more speculative behavior in housing market and it is estimated the prices’ average growth rate couldn’t be more than expected inflation rate in the remaining months of current year.
