Rewritten Title: A Perfect Storm: Expert Analysis Points to Structural Challenges in Iran’s Housing Market
Article:
A senior housing expert has provided a stark analysis of the challenges within Iran’s real estate sector, outlining a multi-faceted crisis that requires comprehensive and coordinated policy solutions.
A Market in Crisis
Hesam Aghbaei, the former head of the Real Estate Union, stated that the housing market is facing a critical situation. He identified a significant crisis in housing production, driven by a sharp decline in construction and investment. This has led to a fall in building permits, with reports from construction material suppliers indicating reduced sales of key materials like iron, rebar, and cement.
“The imbalance between supply and demand is being disrupted,” Aghbaei warned, “which puts more pressure on the latent demand within the market.”
The Speculation Problem
Aghbaei pinpointed a major issue: the prevalence of non-specialists entering the construction sector. He stated that a significant portion of mass housing developers are amateurs who lack sufficient experience, entering the field primarily for speculative, high-profit gains rather than genuine production. This approach, he argued, has reduced both the quality and the real output of housing.
“Price bubbles are the result of a capital-investment view of the housing market,” he explained. This speculative behavior, which once accounted for 80-90% of transactions, has decreased since 2022, but its legacy continues to distort the market.
The Financing Gap
The expert was highly critical of the current banking facilities, noting that high interest rates of 18-25% make loans ineffective for enabling home ownership. “Compared to other countries, even in the Persian Gulf region, our banking interest rates are very high,” he said.
This deters potential investment in construction, as individuals find it more profitable to deposit money in banks for a guaranteed 20% return rather than risk a construction project that would need a 30-40% profit margin to be economically justifiable.
Aghbaei highlighted the stark reality of the financing gap. “In Tehran, with the average price of housing exceeding 100 million Tomans per meter, a loan of 700 million to one billion Tomans can only buy up to 9 square meters of an apartment,” he stated, emphasizing that such loans have no real impact on public purchasing power.
A Three-Fold Supply Shortfall
The core of the crisis, according to Aghbaei, is a massive undersupply of housing. He pointed out that with 700,000 to 850,000 marriages registered annually, the country needs at least 800,000 to one million new housing units just for young couples. However, current housing production and building permits only reach about 230,000 to 300,000 units per year.
“This means we are not even meeting one-third of the country’s real need for housing related to marriage and family formation,” he noted. “There is a significant gap.”
The Path to Reform
Aghbaei stressed that the government’s role, in line with the constitution and specialized laws, is not direct production but supervision and facilitation. He called for a multi-pronged approach to steer the market toward stability.
“The housing market is like a patient with problems in its heart, stomach, and kidneys,” he analogized. “You cannot cure this market’s crisis with a simple formula or a single medicine.”
Key solutions proposed include:
- Land Injection: Supplying identified state-owned land for housing development.
- Effective Banking Facilities: Restructuring loans to be realistic, covering a higher percentage of the unit’s price with longer repayment periods, similar to models in advanced countries.
- Strengthened Management and Oversight: Enforcing regulations to prevent speculation and ensuring banks direct a portion of their resources into the housing sector.
Aghbaei concluded that the ultimate goal is to direct investment toward housing that meets the real needs of society, particularly the middle and lower classes, rather than luxury projects. He affirmed that with the right combination of land supply, effective financing, and robust oversight, the market can move towards stability and truly respond to the people’s needs.
