2 messages from the winter rental market – Tejaratnews
According to Tejarat News, investigations based on official statistics show that the changes in the housing rental market in the country in January of this year contain at least two important messages. The first message is related to the relationship between rental inflation and general inflation.
In January of this year, after months, the monthly rent inflation is lower than the monthly general inflation. The monthly inflation of housing rental index in January in the country was 2.8%; The monthly general inflation in this month is reported as 4.3%.
The second message is related to the stabilization and freezing of the growth rate of rents in January compared to late autumn. The monthly inflation of January in the rental market, according to the statistics center’s account of the changes in the rental price index of residential units in the country, was reported as 2.8%, while in December this rate was also 2.8%.
The important point in this regard is that in the month of September, the monthly inflation of housing rental index in the country was 3.5% and in July it was 4%. This shows the decrease in the growth rate of housing rents in the fall and its freezing in the winter of this year.
In fact, the rate of rent increase in the country was halved at the end of autumn and it went from 6% monthly rent inflation in October to less than 3% in December. At the same time, point-to-point inflation of housing rents also reached 40% from above 50% in the country.
However, studies show that the monthly inflation of nearly three percent in the rental market is still considered a high growth in terms of monthly changes in the price of renting in the country. A 3% monthly growth in rent means an annual inflation of around 40% in this market, which is considered high inflation.
Under normal conditions, the annual housing rent inflation in the country fluctuates between 15 and 25 percent. This is despite the fact that in recent years, the rental market has been affected by two important factors affecting the changes in rental prices, namely general inflation and high housing inflation (surge), and the inflation of this market has been almost double the normal conditions.
The reason for freezing inflation in January
Research on the housing rental market situation in the cities and metropolises of the country led to the identification of at least two important and effective factors in the formation of the winter freezing of rental inflation.
Investigations based on field research of the rental market of major cities of the country such as Isfahan, Tabriz, Mashhad, etc. show that two general factors have been involved in the occurrence of the mentioned conditions and the stabilization of the country’s monthly housing rental inflation at the level of 2.8 percent.
The first factor is related to the effect of seasonal changes on the amount of supply and demand in the rental market, and as a result, the changes in the rents offered by landlords and the fixed rents in the contracts concluded in the winter rental market. Usually, the peak season of moving in the rental market is summer.
Major price changes in this market also occur in this season. As the market moves away from the summer season and moves towards the colder seasons of the year, at the same time as the demand in this market decreases, the rate of growth of the rent usually slows down.
Therefore, a main reason for the freezing of rent inflation in winter can be attributed to the change of season and the decrease in demand in this market, which generally leads to a noticeable drop in prosperity in this market.
The second factor is related to the increasing willingness of tenants to renew the contracts of previous years. A large number of tenants show a desire to renew contracts due to the sharp growth of prices in the rental market; Because in this situation, they have to pay a lower rent compared to a situation where they want to rent a new unit with today’s market conditions.
This willingness of tenants to extend has been welcomed once again by landlords. In the past three years, due to the implementation of the directive to determine the allowed rate for rent increase – an average of 20% in the country – in the extension contracts, many landlords refused to renew because they considered this directive ceiling to be in conflict with the economic realities of the country and general inflation. They refused the contract and tried to sell the unit to another tenant at their desired price.
Now, as the effect of this resolution on the rental market has weakened, once again the landlords have shown their willingness to extend the contract with an agreed amount with the tenants, and as a result, this factor has also led to a decrease in the demand for relocation in the rental market. The effect of this can be seen in the winter freezing of rent inflation. However, field research indicates the existence of a balance of supply and demand in this market.
Source: the world of economy