Features

Most Tehran Residents Will Never be Able to Afford a Home

June 11, 2020
Ali Ranjipour
4 min read
The cost of living crisis has become so severe that the middle classes cannot even afford to buy a place in Tehran’s suburbs
The cost of living crisis has become so severe that the middle classes cannot even afford to buy a place in Tehran’s suburbs
The cost per square foot of an apartment in Tehran's suburbs has doubled since last fall
The cost per square foot of an apartment in Tehran's suburbs has doubled since last fall

In the early 2000s, the prevailing fear among Tehran’s urban middle classes was that they would be driven out into the margins of the cities, due to the migration of the rural poor into Tehran. Now, however, the cost of living crisis has reached such dizzying heights that even the city’s suburbs are entirely out of reach of the middle class.

The number of people in Tehran who do not own a home is substantial. According to the census conducted four years ago, nearly 44 percent of Tehran residents were in rented accommodation. It is safe to assume that since then this number has grown. Now, on average, at least half of the families in Tehran own two homes, while the other half have no place that the can call their own.

In a recent report we showed that if a family has an income of 10 million tomans (US $667) per month and sets aside 40 million tomans ($2,667) per annum to buy a home, even if prices remain stable — a very big “if” — they would not be able to afford a 70-square-meter home for 30 years. Even with twice as much revenue and twice as much savings, the waiting period would still be 15 years.

Of course, this calculation is valid only on paper and is merely used to compute the “wait period”. In reality, the chances for home ownership are even slimmer. Past figures show the ratio of increased income to house price inflation in Iran has never been balanced. And in practice, tenants are rarely able to save anything because they are bled dry for rent, month after month.

If an effective general mechanism for financing home ownership existed in Iran, the “wait period” would be a meaningful index for calculating and guaranteeing the ability to purchase a property. And if an effective system for housing loans existed, an average family could hope that, with a stable income, it could purchase a 70-square-meter place in less than three decades.

But at present, this is nothing but a pipe dream. Neither in Tehran nor in its suburbs such as Parand, Pardis, Andisheh or Shahriar, it is possible for somebody to buy a home merely by relying on his or her income without an injection of capital.

 

Migration of Both People and Prices

On Tuesday, June 9, the newspaper Donya-e Eghtesad (“The World of the Economy”) published a report entitled Migration to the Margins of the Capital. According to this article, since early 2019, following a jump in rent prices, Tehran has been witnessing a mass migration of private rented tenants to the suburbs, especially by many poorer residents of southern Tehran.

This was followed, though, by another surge in rent prices. Average prices in Tehran’s suburbs also showed a considerable increase because many potential real estate buyers who had been looking to buy in cheaper Tehran neighborhoods decided to consider the suburbs, as a result of the huge chasm that has opened up between their budgets and house prices in Tehran proper. In sum, the author of the article concluded it was the very migration from Tehran because of high prices that caused prices in the suburbs to jump as well.

According to the data this article, in 2016 and 2017 the median price for a square meter in Mehr Housing Project in Parand was 900 thousand to a million tomans ($60 to $67). This changed in 2018 and by the summer of that year, a square meter in Mehr Housing Project cost 1.5 million tomans ($100). Now, the median price per square meter at Mehr Housing has risen to around 4.5 million tomans ($300). This is a twofold increase on last fall alone.

Based on today’s prices, a 70-square-meter apartment at Mehr Housing Project would cost 320 million tomans ($21 thousand). What would be the “wait period” to buy an apartment of this size now –  assuming, of course, that prices and incomes both remained stable?

According to the laws of the Islamic Republic, salaries for government employees have a ceiling of 12 million tomans ($800) per month. If a hypothetical senior government can somehow save 50 million tomans ($34 thousand) per year, it would take them seven years to be able to afford a 70-square-meter apartment in Parand. On this basis, to buy the same property, the wait period for a family with an income of 10 million tomans per month ($670) would be more than eight years, and more than 15 years for a family with a monthly income of six million tomans ($400).

These calculations are again not reliable in the real world, where housing prices continue to soar and there is no system in place to finance home ownership. In this world, without a windfall from one place or another, the “wait period” for a middle class family is eternity.

 

Related Coverage:

Khamenei’s Pipe Dream: A Future Free of Oil Dependency, 6 June 2020

Tehran Residents Struggle with Tragically High Housing Prices, 27 May 2020

The World Economy is in Decline and Iran May Suffer More than Others, 11 May 2020

Low Pay and Mounting Pressures: The Saga of Iranian Workers, 2 May 2020

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