Capital Locked in the Housing Market / Does Buying a Home Still Make Economic Sense?

Investment advertising for the housing market continues, while published data shows declining liquidity and the market lagging behind some other assets in returns, making the profit-and-risk assessment of buying a home more critical.

Buying a house for the purpose of investment is not a new issue, but you need to know that out of every 200 files that are put up for sale in Tehran, only one case finds a buyer. This sentence can clarify the truth of investment advertisements in the housing market.

The liquidity rate of housing in Tehran is only half percent. A number that should be important for investors compared to other markets, including cars, currency, and gold. The next important issue for buying a house with the intention of investing is market efficiency. The housing price jump in the past year has been between 15 and 25 percent lower than other markets.

Statistical data from online real estate buying and selling platforms show that the liquidity in this market is only 0.5%. To better understand this number in everyday transactions, you should imagine that out of every 200 houses that the seller registers and advertises for sale on the platforms, during a period of one year, only one house finds a customer and the transaction reaches the stage of the final signing of the document. This statistic is the result of a statistical observation over a period of one year, which reflects the real level of capital liquidity in this sector.

If we compare housing liquidity with other financial and commodity markets, this difference becomes clearer. In the car market, the process of selling a car is usually done within a few weeks after placing an ad and visiting buyers, and the seller receives the transaction money. In the capital market, the liquidity situation is faster. The shares of companies are sold in a few minutes during trading hours. In other financial markets, such as the gold, coin, and currency markets, both buyers and sellers convert their assets into cash without wasting time and in less than a few minutes. In the housing market, however, the seller may wait for months to find a buyer.

How much is the housing price growth compared to other markets?

Examining the files registered on internet platforms shows that the figures offered by housing sellers have increased by 116% in Mehr 1405 compared to Mehr 1404. During the review of this growth rate, there are two statistical and structural points in the real estate market.

The first point is that the price offered by the seller in the initial advertisement is different from the figure that is finally written on the affidavit paper and signed by the two parties below; Therefore, the final rate of housing transactions is always lower than the offer price. The second point is related to the liquidity barrier in the housing market. That is, the low liquidity can make the 116% yield of the property practically ineffective for the investor, because until the final sale, the profit from the investment in the housing market remains only on paper.

There are many statistical differences in the comparative analysis of housing returns with other assets in a one-year period. In the car market, imagine a person who bought a Kwik with zero kilometers last year and used the car for 10,000 kilometers in a year. The profit from the sale of this quick is about 135%.

The price of Kwik zero kilometer last year at the same time was about 640 million tomans. Now, the same Kwik model 1404 with 10,000 kilometers of mileage in the used and second-hand car market has an average value of one billion and 500 million tomans, which indicates a higher yield than the housing market.

In the currency and precious metals markets, the price figures also indicate higher yield acceleration. Although it is not recommended to enter the dollar and gold market for investment, definitive market statistics show that the price of the dollar has recorded a 140% growth over the past year. Along with the jump in the exchange rate, the gold market has also experienced a 140% growth in this one-year period. The sum of these statistics shows that the housing market, in addition to facing the challenge of long-term capital locking, is in a lower position compared to other markets in terms of return rate.