Rental Market Around Tehran Faces Fresh Squeeze; Homes Available, but Landlords Holding Back
The rental housing market is entering autumn under different conditions; although rents rose 32.8% in Shahrivar compared with a year earlier, field reports point to a decline in new listings. The Tehran-area rental squeeze story first appeared on Safir Arjan.
According to Ambassador Arjan, finding a rental house around Tehran is a way for many families to reduce the cost of living compared to the capital; But if the number of units supplied decreases and owners decide to postpone new contracts, these same alternative markets could face limited choice.
Cities around Tehran such as Ray, Islamshahr, Pardis, Varamin, Qarchak, Rabat Karim, Lavasan, etc. They are one of the areas where the situation of the rental market is more important for the households living in Tehran province, however, the field reports of the Mehr reporter indicate a decrease in new rental files in these areas.
Field follow-ups indicate a decrease in the supply of new rental files to the market of the cities around Tehran in the last two weeks, despite the fact that according to the report of the Iranian Statistics Center for Shahrivar 1405, point-to-point housing rental inflation reached 32.8% and annual inflation reached 32.2%, while monthly rent inflation was recorded at 3.6%; It means that the rent index has increased in September compared to August.
At first glance, the 32.8% rent growth seems low compared to the general point-to-point inflation of 89.8%; But this comparison does not mean that housing becomes cheaper for tenants. The rent is still increased compared to the previous year and it is an expense that the household must pay continuously from its income.
On the other hand, the official rent index is not the same as the offered price of each unit or the terms of new contracts. This index provides a general picture of rent price changes; Therefore, the experience of a tenant looking for a new home may differ from the stated average.
Why do some owners not rent the house?
In a conversation with Mehr reporter, one of the owners identified the increase in contract renewals as one of the reasons for the decrease in the supply of new files to the market and added: When the tenant prefers to stay in the current house instead of paying the relocation fee and accepting the unknown market conditions, the unit does not enter the market in the form of a new file. On the other hand, by renewing the contract, we avoid the trouble of finding a new tenant and the risk of the property remaining empty.
Another factor is the decision of some owners to postpone the supply of empty units. According to the reviews of the housing market, this behavior has also been observed in some newly built units and properties owned by developers.
In such a situation, the increase in currency prices and economic uncertainty can affect the calculations of some of the owners. An owner who expects property values or the general level of prices to change in the future may be hesitant to enter into a one-year contract under current conditions.
Of course, the relationship between the increase in the exchange rate and the decrease in rental supply is not a definite and the same relationship for all owners, some owners need monthly rental income and prefer to sell their units to the market faster; Conversely, landlords who can afford to wait may postpone the decision to rent.
A housing market expert told Mehr reporter: The reduction of rental files does not necessarily mean an immediate increase in rent, but it can limit the tenant's choice.
Seyyed Mohsen Zawareh said: When the number of comparable houses decreases, it will take more time to find a unit suitable for the budget, size, and desired location. Because the amount of deposit or rent, its size or location may not fit the needs of the household.
Decreased market mobility and low level of transactions can affect the number of new files
He added: The decrease in market mobility and the low level of transactions can affect the number of new files.
Zawareh said: Increasing supply can help reduce market pressure when new units are compatible with the ability of target households to pay. Building expensive units or supplying houses whose rent is beyond the tenants' means does not necessarily solve the problem of access to housing.
In an interview with Mehr reporter, the head of Varamin Real Estate Consultants Association spoke about the low level of purchase and sale contracts and emphasized: Due to the beginning of the school season, most of the tenants have adjusted their contracts, and the reason for the lack of supply is largely due to this issue and the decrease in demand.
According to Abutaleb Shirkund, in about 80% of cases, the ceiling of 25% rent increase compared to last year has been observed.
At the same time, he stated that compliance with this ceiling cannot be considered certain in all contracts.
If landlords do not supply vacant units, the choice of tenants becomes more limited
Shirkond added: In order to examine the situation of the rental market in the cities of Tehran province, it is necessary to distinguish between two things: the decrease in the number of new files and the decrease in the number of new contracts. When the renewal of contracts increases, even without reducing the total number of rental units, fewer new files enter the market. Conversely, if landlords do not also supply vacant units, the number of homes to choose from will actually be more limited.
What emerges from the market situation is that the increase in rent continues and in some parts of the housing market in the cities around Tehran, a decrease in new files and an increase in contract renewals have been reported. In addition, economic uncertainty can postpone the decision of some owners to supply vacant units.
In the short term, the increase in contract renewals may reduce some of the cost of moving households, but for tenants who are forced to change their residence, the lack of suitable options will continue to be a serious issue.
In the long term, simply controlling the rate of rent increase or providing deposit facilities, without increasing the supply of units according to the financial capacity of households, cannot solve all the market problems. What is important is to create a balance between the number of rentable units, their price and the tenants' ability to pay.
The main question is whether empty houses will return to the rental market and whether the supply of units will increase according to household budgets. The answer to this question depends on the behavior of the owners, the state of the economy and the policies of the housing sector.