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Iran's skyrocketing real estate prices

Source: Mehr News Agency, Tehran

Since autumn 2011, real estate prices in Iran's major cities, and especially in Tehran, have skyrocketed, turning developers into overnight millionaires. Part of the increase is due to a rise in the price of housing materials and land, which was triggered by the cut in fuel subsidies and the sharp drop in the exchange rate for the rial in relation to foreign currency.

Housing towers in north Tehran

Some economists say that the huge level of liquidity, which has reached 346 billion dollars during the two terms of the administration of President Mahmoud Ahmadinejad, is the main reason for the rise in housing prices. However, it seems that the psychological atmosphere created by developers and real estate agents is also at least partly to blame for the current state of affairs.

Tehran Renovation Organization Director Alireza Jafari has said that the price of housing in Tehran has increased more than 40 percent in comparison to the previous Iranian calendar year, which ran from March 2011 to March 2012.

There are many middle class families -- if they can still be called middle class in such a harsh economic situation -- who had been saving money for many years to buy a small apartment, but all their dreams went up in smoke when housing prices skyrocketed.

In tandem with the rise in the price of apartments and houses, rent has also risen a great deal, forcing many families to pay a large proportion of their income in rent.

The government may argue that the Mehr housing project, which provides low cost housing for low-income families, is the remedy to the problem, but the Mehr project cannot properly address the flood of demands for housing in large cities like Tehran.

Moreover, it is very difficult for people who work in Tehran to move to places where the Mehr housing is being constructed, since they would have to spend about three or four hours every day commuting.

Housing prices in satellite cities have also increased sharply. For example, real estate agents say the prices of houses and apartments in Parand, a new city 35 kilometers southwest of Tehran, have increased 100 percent since last year.

The Ahmadinejad administration announced that they planned to convert houses and apartments from capital goods into consumer goods. However, this did not happen, and people began investing even more in real estate.

Tehran Governor Morteza Tamaddon said last September that about 300,000 new houses and apartments in Tehran were empty. He also said that taxes would be imposed on empty houses and apartments, which was not the case before.

Before the prices began to rise so sharply, developers refused to sell houses, waiting for prices to rise more, and finally their wish came true. But many developers are still waiting for prices to increase even more.

In most developed countries, anyone who has more than one house must pay heavy taxes, so there is little incentive to own more than one.

Actually, when real estate prices rise, most governments levy heavy taxes to control prices, but it seems the relevant officials in Iran are reluctant to use this tool to save the people from the avarice of developers and real estate profiteers.

It seems that the government is unable to control housing prices, and thus, many families are falling prey to developers and profiteers.

... Payvand News - 03/18/13 ... --

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