Is the future of the land market better or housing?
According to Trade News, inflation Housing And land inflation finally converged after three years of sharp differences. New data on the price level of residential land in 22 districts of the capital – sales files – show that the growth rate of the price points of apartments and dilapidated properties in the capital at the end of last year, came very close.
Land inflation, meanwhile, was almost three times that of housing during the leap years of 1997-99. One reason for the convergence in property prices is the “impact of the erosive recession on the two property markets.”
the world of economy Wrote: The improvement in construction conditions due to the convergence of two real estate inflation in the capital, including land inflation and housing inflation at the beginning of 1401. This has caused the construction profit margin in Tehran to improve slightly.
An examination of the trend in the land and housing market over the past four years has shown fluctuations in these two real estate markets and has led to changes in the behavior and choices of housing builders.
During the three years from 1997 to 1999, the growth rate of land prices in Tehran was on average three times faster than the growth rate of housing prices. This huge gap between the two types of real estate inflation, such as land and housing, although very large in the leap years, but last year, at the same time with the beginning of the postwar period and the relative stability of housing prices, gradually decreased.
The latest documented statistics of land price changes indicate that the growth rate of land prices has decreased significantly.
Seasonal housing inflation averaged about 60 percent over the three years of the jump. Thus, since last summer, in the official statistics of the land market, the fall of inflation in this part of the real estate market was reported.
The downward trend in land price growth continued last year in the second half of the year; So that now, at the beginning of 1401, the gap between housing and land inflation has sharply decreased in the last three years and has decreased to such an extent that the two inflation rates can be described as “convergent”.
Convergence means that the gap between the rate of growth of housing prices and the rate of growth of land prices relative to each other has been greatly reduced. Of course, both land and housing are still changing prices very little and their inflation rate is not zero, but these incremental changes are happening at a very slow pace.
Improved construction profit margin in 1401
The sound of the return song coming from the land market to the builders, in fact, describes the increase in construction profit margins in Tehran, which can be good news for construction activists who have temporarily stopped their activities.
In fact, the accelerating trend of land inflation compared to inflation Housing During the leap years, construction in the capital was no longer classified as a lucrative economic activity.
Since a construction project takes an average of 18 months to complete, in practice, profits from construction in Tehran due to the high price of land as the most important component of the cost of housing on the one hand and the relative stability of housing prices in the trading market on the other. , Had reached the lowest possible level and was less than the mentioned floor.
Profit margin is the difference between the cost of construction and the selling price of newly built units, which is calculated based on the figures related to the cost of construction, including the cost of supply of construction components (land, materials, tolls, engineering services, etc.) and the selling price of newly built units. It becomes.
In May of this year, the average bid price for each square meter of a newly built apartment in Tehran has reached 411 million and 500,000 tomans.
The latest official statistics on land prices in Tehran belong to the spring of last year, when a report by the Statistics Center showed that the average land price in the capital that season had reached 467 million tomans.
It is noteworthy that the bid price difference of new units in Tehran compared to multi-year units is about 253 percent, and this indicates that the average can be a reliable basis for estimating the profit margin of the manufacturer.
Using the average price of land and the price of new homes in the Tehran housing market, it can be seen in the sales files.
Of course, the approach of the two rates of housing and land inflation in Tehran is more evident in the changes in their points than in the fact that both rates are in the same digit. Inflation of land points at the end of 1400 in Tehran, based on the average bid prices, is estimated at about 233 percent, while inflation of housing points at this time was 17 percent.
Thus, at the beginning of 1401, the growth rate of land and housing prices in Tehran has become very close to each other. Although reaching 30% of construction makers’ income is good news for builders, it does not mean it is the right time to start the boom period.
However, the 30% profit margin is still not attractive enough to pave the way for the formation of a construction wave. In fact, the 30% interest on housing construction, given the construction period of at least a year and a half, is actually equivalent to the 20% bank interest paid on the deposit.
When the construction maker’s income exceeds this amount, it can be hoped that more builders will be ready to return to their professional activity, ie construction in Tehran.
At the moment, it can only be reported that the deterioration of the construction market is not as great as last year, and due to inflationary changes, the conditions for the activity of builders have improved a bit. .
Therefore, the entry of some construction investors into the Tehran housing construction market is slightly expected.
Variables affecting the construction market
This depends a lot on the future of inflation expectations. If inflation expectations are largely controlled, it can be hoped that the housing cycle will continue and that more builders will resume construction activity by breaking the lock on the sale of new units.
Inflation expectations also depend heavily on the risk-taking status of the non-economic variable affecting markets, ie negotiations to lift sanctions. As long as positive news is received about the outcome of the negotiations, its effect is immediately felt in various markets.
In fact, reducing the risk of a non-economic variable will lead to stability or a fall in the price of the currency, which in turn will curb inflation expectations.
In this way, we will gradually see housing prices fall from the unconventional level, and as a result of curbing inflation expectations, housing consumer applicants will be ready to enter the market following the reduction of real housing prices (lower housing inflation than general inflation).
The combination of these conditions can lead to the completion of the housing market chain from construction to sales. Controlling inflation expectations has another important result, and that will be curbing inflation in the construction materials market.
The effectiveness of sanctions lifting negotiations can lead to price stability in the materials market, and in addition to “land prices” as a major component of the cost of construction, the acceleration of “material inflation” is reduced, and as a result, the construction profit margin of this Location will also be expandable.
In addition to all these variables, the implementation of some wrong policies as well as some inactions by the housing policymaker exacerbates the recession in the construction market and housing transactions.
Due to the lack of effective tax leverage to combat real estate freezing, many investments go to the ready-to-sell market instead of to housing construction, and eventually these ready-made units are frozen and unused.
However, by applying effective tax leverage, ie annual property tax, and creating risk and cost for property and speculation, not only the last link in the construction process, ie housing transactions, will prosper, but also real estate capital will be spent on housing construction.