A look at the housing market outlook in 1402

A look at the housing market outlook in 1402

The possibility of a housing bubble burst in the new year

A look at the housing market outlook in 1402, according to Iran Gate’s field observations of the housing market during the Norouz holidays, indicates a lack of movement in supply and demand. However, this situation is not limited to the early days of the year, as the market has been in a heavy recession phase since the beginning of Bahman month and has not seen any changes in its condition yet.

Housing prices have taken an uncontrollable upward trend in the years following Trump’s withdrawal from the JCPOA. Despite the ongoing trend, it seems unlikely to be reversible, but the market is reaching an unprecedented record.

Many experts and market participants believe that the significant fluctuations and wide-ranging exchange rate in recent months have been the most important factor creating such an atmosphere in the real estate market. Both sellers and buyers sit at the negotiating table with much uncertainty in order to enter into contracts.

What is the reason for market uncertainty?

The reason for the sellers’ hesitation is completely clear why they believe that by delaying the deal and postponing it until after the Nowruz holidays in 2023, they will have the opportunity to sell their property at a higher price. However, it should be noted that many real estate market experts believe that the housing bubble is so high that it is inevitably going to burst and fall behind inflation in the new year, which cannot be ignored.

Buyers, on the other hand, do not currently have serious intentions to buy, justifying it with similar but opposite reasoning. Unlike sellers, applicants in the housing market believe that the housing bubble will burst in the new year sooner or later, and prices will take a downward trend. However, some also believe that even if this bubble does not burst, the likelihood that the pace of housing price growth will remain significantly higher than heavy inflation, around 50%, is much greater. For this reason, they have decided to temporarily park their money in some parallel markets, especially the foreign exchange and gold markets, in order to avoid inflation and also possibly be able to buy a larger house in the coming days in 2023.

Dollar becomes a concern for housing buyers

One of the reasons that has led to the current severe recession in the housing market is the sudden drop of about 15,000 tomans in the exchange rate of the dollar in the two weeks leading up to the end of the year 1401. Prior to that, there had also been a sudden surge in the price of foreign currency, reaching 60,000 tomans, which had caused significant turmoil in parallel markets and resulted in a sharp decline in real estate transactions. However, it should not be forgotten that real estate market players concluded the year with the expectation that the downward trend in the dollar exchange rate will likely continue in the new year, and they entered the Nowruz holiday.

But with the start of the year 1402 and the beginning of trading in the foreign exchange market, it became clear that this perception of the market’s future was incorrect. The price of the dollar once again returned to the range of over 55,000 tomans, and it seems that the upward trend in rates will continue in the days after the holidays. Therefore, at first glance, it can be said that the demand side in the housing market has been affected and the stagnant market is the loser in transactions.

The housing market is experiencing a bubble.

According to most economic analysts, the housing market, along with the gold market, is the only market that has been facing a significant price bubble for years. In other words, these experts believe that the pace of housing price growth in the market is much higher than the inflation rate, and simply put, these prices are not real and will eventually correct in the housing market.

Verifying the accuracy of such a claim is not an easy task. Comparing housing prices in Iran with international markets and comparing them to other capital or consumer assets can reveal the reality, regardless of the inflation rate in Iran and whether it will be controlled or not. Comparing different prices with global markets can be helpful in this regard.

However, comparing the housing price index in major cities in Iran with 50 major cities worldwide shows that the claim of a housing bubble in Iran is not entirely baseless. When it comes to a specific comparison, we will realize that the price of a newly built apartment unit in the Farahzad neighborhood of Tehran is about one and a half times higher than the affluent Kensington area in London.

According to the statistics of the Central Bank, the average housing prices in Tehran are higher than major cities like New York, Shanghai, London, and even Istanbul, despite the 75% inflation rate in Turkey. This indicates that the housing market in domestic markets is truly speculative, and there is a possibility of a bubble burst.

However, whether this will happen in the year 1402 or not depends on various factors including the foreign policy of the Islamic Republic, the level of oil sales, exchange rate fluctuations, and the monetary policy of the Central Bank.

The intensity of inflation in the housing market until the end of the year.

Prices in the housing market have become hourly.