A Look at the Housing Market Outlook for 2023
Potential Housing Bubble Burst in the New Year
A Look at the Housing Market Outlook for 2023: According to Iran Gate, field observations from the housing market during the Nowruz holidays indicate a lack of movement from both the supply and demand sides. This situation is not limited to the early days of the year, as the market has been in a deep recession since the beginning of February and has yet to see any change.
Housing prices have taken an uncontrollable upward trend since Trump exited the JCPOA. Although this trend continues and seems unmanageable, the market is experiencing an unprecedented recession.
Many experts and housing market activists believe that the volatile and wide-ranging fluctuations in the exchange rate in recent months have been the main factor creating such an atmosphere in real estate transactions. Both sellers and buyers approach negotiations with significant hesitation.
What is the Reason for Market Hesitation?
The reason for sellers’ hesitation is quite clear. They believe that by delaying transactions until after the Nowruz holidays of 2023, they can sell their properties at higher prices. However, many housing market experts believe that the real estate price bubble is so high that the possibility of it bursting and lagging behind inflation in the new year cannot be ignored.
Buyers, on the other hand, have a similar but opposite justification and currently have no serious intention to buy. Unlike sellers, buyers in the housing market believe that the housing bubble will burst sooner or later this year, leading to a downward trend in prices. Some also believe that even if the bubble does not burst, the likelihood of housing price growth lagging behind the heavy inflation of around 50% is much higher. Therefore, they have decided to temporarily park their money in parallel markets, particularly the currency and gold markets, to avoid falling behind inflation and possibly buy a larger home in 2023.
Dollar Hovered Over Housing Buyers
One of the reasons for the current severe recession in the housing market was the sudden fall of about 15,000 tomans in the dollar rate in the two weeks leading up to the end of 2022. Although prior to that, the sudden jump in the exchange rate to the 60,000-toman channel had also caused significant turmoil in parallel markets, leading to a sharp drop in real estate transactions. However, it should not be forgotten that housing market participants ended the year with the expectation that the downward trend of the dollar rate would continue in the new year, and they entered the Nowruz holidays with this outlook.
However, with the start of 2023 and the resumption of currency market transactions, it became clear that such an outlook for the market’s future was incorrect. The dollar price returned to above the 55,000-toman range, and it seems that the upward trend will continue after the holidays. Therefore, at first glance, it can be said that the demand side in the housing market has suffered losses and is the loser in the stagnant transaction field.
The Housing Market Has a Bubble
According to most economic analysts, the housing market, alongside the coin market, is the only market that has been facing a large price bubble for years. In other words, these experts believe that the rate of housing price growth in the market has far outpaced inflation, and simply put, these prices are not real, and sooner or later, the situation in the housing market will change.
Verifying how accurate this claim is not difficult. Comparing housing prices in Iran with global markets and aligning them with other capital or consumer assets can reveal the truth. Regardless of how high inflation is in Iran and whether it will be controlled, comparing various prices with global markets can be enlightening in this regard.
However, comparing the housing price index in Iran’s metropolises with the 50 largest metropolises globally shows that the claim of a housing bubble in Iran is not unfounded. When it comes to detailed comparisons, we find that the price of a new apartment in the Fereshteh neighborhood of Tehran is about one and a half times higher than in the ultra-affluent Kensington area of London.
According to Central Bank statistics, the average housing price in Tehran is also higher than in megacities like New York, Shanghai, London, and even Istanbul, despite Turkey’s 75% inflation rate. With these details, it can be said that housing prices in domestic markets are truly in a bubble, with the potential for it to burst.
However, whether this will happen in 2023 depends on various factors, including the foreign policy of the Islamic Republic, oil sales, exchange rate fluctuations, and the Central Bank’s monetary policy.
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