A satellite city northeast of Tehran, nearly half the buildings remain unfinished. (Supplied)

The devaluation of Iran’s national currency, inflation, and the effect of parallel markets did not have an effect on the rental market as they did on the housing rate, but rents are gradually rising. The target community, which cannot afford to buy a house, has moved to the rental market, and this trend will continue in the coming years, to the point where rent growth rates will continue to rise and will be aligned with the rate increase in housing rates, according to Iranian economic experts.

The government set the permitted rate of rent increase in Tehran at 25 percent, but prices have risen by 50 to 100 percent over the past year. This is because inflation has risen, housing prices have jumped, and homeowners expect the gap between housing rates and rents to be bridged.

Over the past three years, on the one hand, the jump in the exchange rate has led to the growth of housing rates, and on the other hand, the country has faced a construction downturn due to a sharp decline in transactions. This also led to demand pressure in the buying and renting sector. Despite the constructions that are done in Tehran, the supply does not meet the pressure of demand and therefore the rent and sales rates increase.

Fluctuations in the price of cement, which have risen from 35,000 tomans per pack to more than 70,000 tomans, have little effect on housing prices in the current situation. The main part of the costs is related to land. Some 30% of the construction rate is the cost of manpower and workers’ wages, while part of it goes to engineering services and municipal tolls.

Fluctuations in steel and cement prices do not have a short-term effect on housing prices but can raise construction rates somewhat and lead to a percentage increase in property prices in the medium term.

If the government can reduce inflation to at least 20 percent, it can be hoped that some housing rates will be controlled in the future. All levels of the housing market, including construction, sales, and rent, have a kind of correlation that also affects the macroeconomy. Thus, general inflation and national monetary value are directly related to all three components in the housing market.

People do not have the money to buy a house now, but they must settle in a place that goes to the rental market. Due to the shortage of supply and increasing demand, competition in the rental market is taking shape, which has led to rising prices.

Many tenants have also moved to cities around Tehran, such as Pardis, Parand, Hashtgerd, and Shahriyar. Some experts argue that if these cities did not exist, the living conditions of the tenants would have been even more difficult than they are today.

By advising people not to buy housing or not providing statistics, the government has wanted to control the market, but in this period, the housing rate in Tehran increased from 13 million tomans per square meter in mid-2018 to 130 million tomans per meter in July 2021.

In the national housing, the price per meter was considered 2.7 million Tomans for the builders, and despite the growth of the price of construction materials in the last year, they did not update this rate, and in fact, they pushed the spring of the price increase.

Regarding the renovation of dysfunctional urban structures, the government has planned to renovate 100,000 units annually, but almost nothing positive happened in this field, and they did not reach one-tenth of the goals.

Iran Focus

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Track PersiaTrack Persia is a Platform run by dedicated analysts who spend much of their time researching the Middle East, in due process we fall upon many indications of growing expansionary ambitions on the part of Iran in the MENA region and the wider Islamic world. These ambitions commonly increase tensions and undermine stability.