Chaotic housing market in Iran: the result of a bad strategy

housing market in Iran faces chaos once again
housing market in Iran faces chaos once again

As a result of another wrong strategy, the housing market in Iran faces chaos once again. The tenants who have to look for a lower quality housing and the landlords who increases the rates too high are the only results.

The best period for house-moving is normally the summer time when the schools are closed. A recent report by the Statistical Center of Iran shows that last summer, i.e. June to September 2021, the number of new rental contracts has gone up by 200%.

Nationwide more than 61,000 new rental contracts were made in that period which shows a huge jump from 11,000 contracts made during the same period in 2020.

The average increase for rental prices has experienced a 110% growth with respect to a year ago.

This is while the Government had passed an act to force the landlords to renew the rental contracts by 20% or in Tehran by 25% increase only.

A bad strategy which was supposed to help

The act was supposed to cushion the tenants from the economic damages caused by the spread of the Corona Virus. The same act was applied to the renewal contracts in 2020. It also prevented landlords to ask tenants to vacate the property.

However, the act could have been triggered only once for any contract. Therefore, if a tenant had used it to renew its contract by 20 to 25% in 2020, he could not use it again.

As a result, the landlords who were forced to observe it in the summer of 2020, basically started to “kick out” their tenants in 2021.

The chaos created in the housing market and growing demand led to considerable increase in rental prices to more than 110% which was far from the Government’s desire to keep it around 25%.

A goal which, considering that the inflation rate for the past year was at least 35%, was absolutely unrealistic.

Chaos lower the quality in the housing market

The report shows that tenants who had been forced to move out to cope with new prices mainly had to decrease the size of the property they were looking to rent and to choose older buildings.

On average the size of the new contracts has decreased by 15% and also the age of the buildings has gone up to 13 years old.

It is important to note that the average useful life of a building is 40 to 50 years which is much lower than the average in industrial countries.

Therefore, the numbers show that the quality of the housing has also decreased considerably.

The fact is, those landlords who did not know about the act in 2020, or did not mention that their renewal prices in that year was compatible by the Corona-Act, had to obey the law in the past year. Almost no court permitted the landlords to force their tenants who wished to use the act for the first time.

Since April 2022 the Coronal Act can no longer be triggered and therefor this group of landlords who neither could ask for a higher rent nor could force people out, are ready to take a step forward.

What the impact of this new movement might be on the rental market as soon as the school holidays start, we shall wait and see.

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