Homeownership has become an increasingly distant dream for many Iranians, as the surging cost of housing and economic instability have outpaced income growth, recent statistics reveal.
Following a surge in housing prices in the early 2010s, Iran experienced a period of market stagnation.
However, the implementation of the Joint Comprehensive Plan of Action (JCPOA) in 2015 resulted in a slowing inflation rate and increased household income, leading to improved purchasing power for urban families, according to data from the Statistical Center of Iran (SCI).
Short-lived trends
However, this positive trend was short-lived. After 2017, the abrogation of the JCPOA and subsequent U.S. sanctions triggered a downward spiral in the purchasing power of urban households.
In 2015, the average urban household could afford to purchase 19.4 square meters of land with their annual income. By 2017, this figure had risen to 22.8 square meters, even as construction prices slightly increased. By 2021, the situation had reversed dramatically. A sharp rise in housing prices meant that households could only afford 9.5 square meters of housing with their annual income, as housing costs had grown more than twice as fast as household income.
Once the costs of food and other household expenses were factored in, the purchasing power for housing fell even further, to 7.4 square meters in 2021.
The dream of home ownership now seems largely unattainable without government intervention, such as the National Housing Movement plan, which has struggled to find funding as coffers run dry.
Furthermore, the wait time for an urban household to save enough to afford an 80-square-meter residential unit has also increased significantly.
Dreaming of apartments
If housing prices remain stable and families save all their annual income, they would need to wait for 8.4 years as of 2021 to afford such a house, up from 3.5 years in 2017.
When factoring in the cost of food, this wait time extends to nearly 11 years. For households accounting for total costs, the wait time soars to an estimated 47.4 years as of 2021.
While official statistics for the past two years are not available, unofficial estimates suggest the current average wait time could be around 60 years.
The Iranian property market is unique in some respects as, unlike other countries does not offer mortgages for properties in high-value locations. Some mortgage-like loans are available for properties of low-cost homes but in locations like Tehran, where the average home can hit above $200,000, potential buyers are expected to find the money elsewhere, usually with a property deed of another family property as collateral.
Part of the issue in the Iranian financial sector is down to a need for more credit scoring availability. With companies like Experian and Equifax not operating in the market due to sanctions and Iran’s banking sector being in dire straits, the issue has not yet been resolved.
Banks failure to provide mortgages
Earlier in 2022, Aftab news reported that Iranian banks, both private and government-owned refused to give property loans to people. However, despite the amount on offer, the loans are well below the true value of apartments on the market.
Efforts had been made in prior administrations, including the Rouhani administration, to create full credit scoring facilities to enable better oversight of buyers' liquidity. However, this has run into serious roadblocks.
Earlier, Tehran Bazaar reported that despite the lack of information available to the public, online listing platforms are able to give further insight into the situation for homebuyers in the Tehran market.
Divar.ir previously reported that purchasing power has significantly collapsed in recent years with people in the capital opting for smaller apartments.
Divar's data also gives a snapshot of the market segmented by apartment size. Between early April and mid-July, smaller apartments, up to 50 square meters, accounted for 9% of advertised properties.
The largest segment of ads - 28% - featured properties ranging between 51 to 75 square meters. Larger apartments, those exceeding 1000 square meters, barely scraped the market with a meager 0.04% of the advertised properties.