The Iranian real estate market is entering a new stagflation period in 2024 due to the increase in the dollar exchange rate.
Saeed Lotfi, the secretary of the Real Estate Consultants Union, mentioned the housing market in spring 2024, stating that with the growth of the dollar rate, there is a possibility of a recurrence of stagflation in the housing market.
In an interview with the state-run ILNA news agency on March 22, Lotfi emphasized that the government’s announcement of the official inflation rate at the beginning of the Persian New Year, beginning on March 20, affects all markets, including housing.
In mid-September 2023, Hamshahri newspaper, the news organ of Tehran Municipality, confirmed a recession in the housing and construction sector, stating that the housing market has entered one of its toughest recession periods after the unreasonable price hike in winter 2022.
The report pointed to a decrease in liquidity circulation in the housing market and the inability of some developers to continue construction, emphasizing that the cessation of liquidity injection by the banking system is one of the factors affecting the recession in construction.
The secretary of the Real Estate Consultants Union, in his conversation, referred to the closure of the new year coinciding with the month of Ramadan and very weak transactions in April due to the market’s anticipation of the announcement of economic indicators such as the inflation rate. He reminded that until stability is observed in the housing market, there will be no news of transactions in it.
Stagflation refers to an increase in average prices despite a decrease in transactions and demand.
According to Lotfi, people’s purchasing power does not match the current housing market prices, and with price increases, the volume of transactions will decrease further, ultimately reducing people’s purchasing power.
Lotfi referred to the experience of stagflation in the housing market in previous years and stated that the market is currently “in recession, and its transaction volume has decreased.”
He predicted that if the dollar rate continues to grow, the housing market will not show immediate effects, but it will lead to stagflation in the housing market this year with some delay.
Lotfi said that although the government managed to suppress the housing price increase from March to November 2023 by controlling the dollar rate, the growth of the dollar rate in early 2024 would also affect housing.
The Iranian Statistical Center, in mid-October 2023 and after eight months of data suppression and censorship, reported a record annual inflation rate of 84 percent for residential properties in the capital in September.
According to this report, the weighted average price per square meter of residential apartments in Tehran reached around 810 million rials (approximately $1,350) in September.
It is noteworthy that the minimum wage for workers in 2023 was around $133.
Weighted average is an average that reflects the relative importance of different factors considered in averaging.
In the eight months when the Iranian regime’s Statistical Center halted the publication of housing price statistics in the capital, the price record reached its highest level in June 2023.
Experts had assessed that this factor was the most important motivation for the statistical center and the central bank to censor and withhold statistics related to housing market developments in the early months of recent years.
The housing price inflation rate in June 2023 was reported to be close to 122 percent point-to-point, but by September, it had slightly moderated to over 75 percent.
In other words, the weighted average price per square meter of residential apartments in June 2023 was more than double the average prices in June 2022.
The housing market and the construction sector in Iran have been in recession over the past four years due to reasons such as general inflation, increase in exchange rates, and fluctuations in the price of construction materials.
