EghtesadOnline: A review of data by the Central Bank of Iran shows that residents of Tehran, the bustling capital city accounting for roughly half of all home sales in the country, increasingly favor smaller homes as their purchasing power has dwindled.
The latest report on housing developments in Tehran published by CBI on its official website showed that as the total number of home deals in the city during the fifth month of the current year that ended on Aug. 22 indicated a year-on-year decline of 33.2%, average prices for each square meter of a residential unit signaled a massive 62.1% surge.
From a five-month perspective, the total number of home deals declined by 7.3% when compared to the corresponding period of last year while average prices jumped by 45.5%.
This trend has prevailed over the past three months, but more significantly, prices have continued to rise for a much longer period, massively eroding the purchasing power of Tehran’s residents, according to Financial Tribune.
Many have been forced to leave the city, but the ones that can still afford to stay are increasingly turning to smaller homes. Demand for luxury homes, mostly situated in the affluent District 1 north of the city, is extremely low.
Latest CBI data for the fifth month of the current year showed that units with areas of 60-70 square meters had the highest demand among Tehran residents with a 15.4% share. Units with areas of 50-60 square meters and 70-80 square meters were next with respective shares of 14.5% and 12.1%. All in all, units with areas of under 80 square meters had a 55.2% share.
According to CBI, demand for residential units with an average per square meter price of 30 million rials ($229) to 40 million rials ($305), much lower than the average of 74 million rials ($565), was highest in Tehran with a 12.4% share of all deals.
These were followed by apartments priced between 40 million rials to 50 million rials ($382) and 50 million rials to 60 million rials ($458) with respective shares of 12% and 10.3%. Units with a price range of lower than the city-wide average grabbed a 57.7% share of all deals.
This years-long trend of demand for cheaper homes with lower areas has been recognized by the Ministry of Roads and Urban Development, whose officials have on many occasions called on builders to focus their activities on real demand.
To this end, they have first and foremost employed the capacities of Bank Maskan, the agent bank of the housing sector. The lender is trying to focus its facilities more to support prospective homebuyers and homebuilders.
For homebuyers, especially those looking to purchase their first homes, it established the Housing Savings Account some three years ago, an initiative that requires applicants to make down payments and wait for a year to become eligible for cheap loans amounting to double their deposits.
The initiative has been welcomed more warmly than initially anticipated, registering close to half a million applicants so far.
To incentivize homebuilders, the bank has tried to limit the flow of loans to bigger and more luxurious homes.
Recently, Bank Maskan CEO Abolqasem Rahimi Anaraki announced that home construction loans will only be allocated to builders that aim to build homes with medium to low areas. Those caps have been set at 75 square meters in Tehran and 100 square meters in other cities.
“Bank Maskan branch managers across the country must refrain from allocating facilities to projects that have no effective demand to prevent resources being locked in ineffective and non-consumer housing sectors and maintain the flow of bank credit,” he said.