Prices have risen at least 15 percent in the past three months, according to three real estate agents based in the capital.
“After the fluctuations in the gold and currency markets, the real-estate market has started to move again, and this shows the direction of liquidity,” said Mousa Ghaninejad, an independent Tehran-based economist. “People feel the value of their money is dropping, so they want to switch to something that is a fixed asset,” he told Bloomberg news.
The average cost of residential property per square meter in Tehran is about 20 million rials ($1,600) and about 120,000 transactions on average are made every year, according to the Donya-e-Eqtesad newspaper, citing official data. In affluent northern Tehran, prices can rise to about 150 million rials per square meter.
The average city-wide price in Istanbul as of January this year was $771 per square meter, while in Dubai—whose per- capita income is about 10 times Iran’s — it was $2,441, according to ReidIn, a real estate company that compiles price indexes and has offices in both cities.
“When there is devaluation, money is usually directed to property,” said Ramin Rabii, the managing director of Turquoise Partners, a Tehran-based investment firm. He predicts further gains in property prices this year.
The last boom in Tehran house prices was in 2007 and early 2008, when high oil prices spread liquidity through Iran’s economy and banks offered cheap loans, according to Rabii. Prices plunged more than 30 percent from the summer of 2008, when the global economic crisis sparked a slump in oil prices, to mid-2009, according to a July report by the International Monetary Fund that tracked data through the end of 2010.
Iran has a state-owned lender, Bank Maskan, that specializes in housing loans, which account for 28 percent of credit in the banking system, according to the IMF. State home loans are capped at about 180 million rials ($15,000), so Iranians typically use savings and money borrowed from friends and family to pay for homes mostly in cash, Rabii said.
“Raw material, labor, transport, the cost of everything has increased,” said Raymond Vartanian, director of the Robinson real-estate agency in the Mirdamad suburb of Tehran. “Owners of property are revising their prices upward. They’re afraid that if they sell today for the purpose of getting a bigger space tomorrow, they may still be short of cash in their next transactions because of inflation.”
The government has taken measures to dampen speculation in property, such as barring the resale of homes within fixed time limits. That means demand is now coming from long-term buyers instead of speculators who pushed prices up before 2008, according to Delta real-estate agency, one of Tehran’s largest.
Still, expectations that prices will continue to rise are rooted in the culture, economist Ghaninejad said. “When it comes to property, there’s always been a saying that land is gold,” he said.