What’s Happening to Iran’s Property Market?

In recent months, we at Bazaar Business have been hearing all sorts of interesting points about the health of Iran’s property market.

Firstly with the closure of the Maskan Mehr project, which offered cheap homes to the country’s low income earners. A marvelous idea in theory, and one which the Ahmadinejad administration was commended for at first, but things began to turn sour, with the over exploitation of the project, and its slapdash construction methods become synonymous with a “bad lifestyle.” Akin to the mass housing projects of the early to mid twentieth century in Europe, Maskan Mehr, and its partner projects offered a cheap per square meter price for families on low incomes, in theory situated near industrial and commercial areas. However in hindsight like many of the Ahmadinejad projects of the first administration, these became the elephant in the room. In actuality, poor families were unable to afford the reduced square meter cost, and obviously Iran being a capitalist economy rather than socialist, those with the money — mainly the middle class – ended up buying the apartments on offer.

The knock on affect of the Maskan projects, coupled with the barrage of sanctions on the Islamic Republic, lead to the great jump in property prices the country had ever witnessed. Seen as a safe investment in the long term, and a far less volatile asset class, property along the with Maskan projects began to fuel the country’s runaway inflation. Unfortunately the unrelenting sanctions only added fuel to the fire, with people using their properties and slush funds and helping their kids –much like the west- to get ahead of their peers in the short term. Other areas of such opulence are also quite evident in Iran, with all sorts of cars being imported into the country with as much as 100 percent tax being levied at the ports. These as an alternative asset class also carried themselves to temper the effects of the price rises.

Fast forward to today, and the country’s inflation rate has begun to fall, around 24%, much for the better of the whole economy, although property and other high value assets remain stubbornly high. The problem is at what point will the Iranian property market become more palatable for the great swathes of the general populace? The ongoing issue is that even with the slow decrease in value by the square meter, the problem remains that people and the youth in particular which still make up the majority of the population cannot afford such prices.

In one report by the Financial Tribune, they highlight the prices around the Iranian capital, the article stated that the Statistical Center of Iran has said

“The average price for one square meter of land in the north of the capital hovers around 8.7 million Toman”

No one understands how they worked this out, but it is still way short of the real average, presumably taxis don’t go up to Fereshteh St, of which prices have been recorded well in excess of 30 million Toman a meter. The article goes on to say the price in the south of the city is 1.9 million Toman per square meter, a price much fairer than the north, but one which then pushes the poor in the city further afield.

The article goes on to say “The same prices apply to apartments in Tehran’s 22 different regions. An increase in house prices has resulted in diminished purchasing power. The market fluctuations have discouraged owners from selling their property and applicants are reluctant to buy apartments at current rates. Therefore, the level of activity in the housing market has seen a sharp decline during the past two years. Fluctuations in the price of essential goods and raw materials for home building have also had a significant impact on the housing market.”

This situation although only briefly covered in this text explains the national problem rather than a metropolitan Tehran one. In all cities around the country, people are stuck in their present apartments, unable to shift up the property ladder due to the increase in prices, some people, in the case of Tehran may have to leave the city and relocate elsewhere due to the current unfathomable pricing structure.” It remains to be seen whether or not the prices of the country’s properties will decline anytime soon, the issue of inflated prices is only going to perpetuate in the coming months due to current inflation levels.