Iran International
Real estate experts anticipate a significant rise in housing prices in Iran due to factors such as further depreciation of the national currency, but they also foresee continued stagnation in the market.
Sellers refuse to lower prices as the national currency loses value, and inflation drives rents higher, putting further pressure on tens of millions of people.
Iran's housing market has experienced stagflation over the past two years due to various factors, including high inflation of at least 40 percent, which has substantially increased construction costs. Additionally, repeated turbulence in the foreign currency market, a notable decrease in liquidity available to developers, and political uncertainties have all contributed to the market's challenges.
Even before Norouz (March 20), typically a period of high property sales, Iran's housing market remained stagnant. Factors such as the fasting month of Ramadan, traditionally a quiet period for most markets, and exorbitant prices beyond the reach of many wage-earners have contributed to this situation.
Experts do not anticipate a significant uptick in the housing market's activity even after Ramadan, even if economic indicators such as the monthly inflation rate, typically announced by the central bank in late April, show improvement.
The rial has fallen more than 20 percent since January and now stands at more than 610,000 against the US dollar. Fearing further depreciations in the new calendar year, many rush to buy foreign currencies to protect their cash and investments. Real estate and homes are the most important savings for the middle class and people are reluctant to sell for worthless rials. Sellers calculate the price of their real estate in dollars when they set a price.
The figures released by the Statistics Center of Iran in February indicated an annual inflation rate of nearly 40 percent in the housing market in the preceding twelve months.
The average cost of one square meter of apartments in Tehran and most other major cities is currently above 700 million rials (over $1150) whereas the average monthly earnings of civil servants barely exceed $200 after taxes and other deductions. Ordinary workers earn less than $200 a month.
Unaffordability of properties for sale is a major factor in driving rents up in the capital and other major cities where the cost constitutes around half of the consumer living cost.
Similar to populist promises made by former President Mahmoud Ahmadinejad, President Ebrahim Raisi pledged during his 2021 presidential campaign to address Iran's housing crisis by constructing one million affordable apartments annually. So far there is no sign of any new housing having even started.
The ambitious Mehr Housing scheme launched by Ahmadinejad during his tenure, from 2005 to 2013, also aimed at building over 4 million housing units. The project was never completed and the apartments that were eventually delivered to some of the buyers lacked amenities. This was during time period when Iran was earning more than $100 billion a year from oil exports and the government was awash with cash. Now, amid US sanctions, and lower prices, Iran earns a fraction of that income.
Architect and university professor Beytollah Sadeghi, a vocal critic of excessive government interference in housing projects, emphasized that constructing one million residential units constitutes approximately 4% of all urban development. He underscored the need for double-digit economic growth to support such a massive undertaking.
Sadeghi questioned why Iran's private sector struggles to achieve similar feats compared to neighboring countries, which not only thrive but also create markets for others. He raised concerns about potential obstacles hindering Iran's private sector, such as lack of resources or expertise.
The fact that in Iran's government-controlled media landscape the criticisms have been published immediately after Supreme Leader Ali Khamenei and President Ebrahim Raisi's New Year messages, indicates that compared with even a few months ago, the government has effectively lost its authority and control.
In Iran's government-controlled media landscape, the publication of criticisms immediately following Supreme Leader Ali Khamenei and President Ebrahim Raisi's New Year messages signifies a notable shift. This suggests that the regime has lost more credibility and its control over public discourse has somewhat weakened, especially when compared to just a few months ago.
Khamenei in his new year message had challenged the US and Israel and claimed that America’s supremacy in the Middle East was waning. He also took pride in the recent elections in Iran, although they have been branded by Iranian media and political observers as the worst in the history of the Islamic Republic in terms of turnout and representativeness.
Meanwhile, in his mostly ignored Iranian New Year message, Raisi as usual presented fabricated figures about economic progress, especially in the areas of housing and employment, while everyone else speaks about declining living standards.
In a report published by Tehran-based Khabar Online news website on March 21, the second day of the Iranian New Year, experts outlined the missed opportunities in foreign relations, emphasized the government's economic failures, and called for radical changes in its policies.
The website quoted former diplomat Fereidoun Majlesi, who expressed concerns about Iran's diminishing international standing as its economic conditions worsen. Majlesi highlighted Iran's isolation throughout the past year and its failure to establish effective diplomatic relations with other nations.
He emphasized that Iran's foreign policy predominantly revolved around its relations with Arab countries and its stance on the conflict in Gaza, neglecting efforts to mend its strained relations with Western nations.
Echoing sentiments shared by many Iranian foreign policy experts, Majlesi called for a reassessment of the Islamic Republic's foreign policy to better serve the country's national interests. He noted Iran's lack of a coherent foreign policy framework, with limited diplomatic ties beyond its relationships with Syria and a handful of African states. Other nations either tolerate Iran or have severed diplomatic relations altogether.
He emphasized that although Iranian diplomats repeatedly speak about their readiness to revive the nuclear talks, there has been absolutely no progress in that area.
Meanwhile, international relations expert Alireza Bigdeli criticized Iran's one-sided relationships with Russia and China, emphasizing that the East cannot effectively assist Iran in revitalizing its struggling economy.
Bigdeli highlighted that when Joe Biden assumed office as US President, he pledged to engage in negotiations with Iran to resolve the nuclear standoff. However, Iran missed this opportunity due to its involvement in regional crises, resulting in no progress. Additionally, Bigdeli noted that Iran alienated the European Union, with Europe refraining from issuing harsh resolutions just because Washington did not want to up the ante.
He argued that Iran can only improving its foreign relations once it stabilizes its ties with the West. On the other hand, Ghasem Mohebali, another foreign relations expert, called for a comprehensive reassessment of Iran's foreign policy in the new year. He highlighted that Iran lost control over the nuclear negotiations last year, leading to heightened sanctions.
Mohebali expressed concern that with the potential return of Donald Trump to the White House, Iran should be more vigilant than ever about its relations with Washington. He identified a major issue with Iran's foreign policy as the lack of control by its Foreign Ministry, with other influential players, such as Khamenei and the IRGC, steering the country toward alliances with Russia and China, hindering a balanced foreign policy approach.
