The brake on rent increase was pulled – Tejaratnews

According to Tejarat News, despite the increase in inflation and the astronomical speed of expenses in the country, the rate of rent growth has been significantly reduced these days.

The rate of growth of housing rent in Tehran and the whole country decreased based on the average index. The statistics of the changes in the rent price index in November show that the increase in the amount of rent was less compared to the growth in October. However, rent inflation remains well above historical averages. Studies on the fall of rent inflation identify three causes.
The fall of rent inflation occurred in the middle of autumn, and the rate of rent growth in Tehran and the country decreased in November. Based on the official statistics published by the central bank, the surveys show a noticeable decrease in the rate of rent growth both in Tehran and in the country. This fall of rental inflation has shown itself in the form of a decrease in the rate of rent growth, both in terms of monthly changes and in terms of changes in housing rent index in November of this year compared to the same month of the previous year (point by point inflation), in official statistics.

This November, housing rent in Tehran increased by 4.1% compared to the previous month, October 1401. This growth rate in the same period of time in the country was equal to 5%. The growth of 4.1 percent of rents in Tehran and 5 percent of rents in the country was achieved in November this year and it was recorded that in the previous month, October, the monthly rent inflation reached the peak of inflation both in Tehran and in the country. 7% monthly inflation in the housing rental market of Tehran and the country was recorded in October, while this rate of monthly rental inflation was not only the highest monthly inflation in this market in 1401, but also according to “Dunya Ekotsat” surveys of the monthly housing rental inflation. Since 1992, this monthly fall rate of rental prices has been unprecedented.

In the report that he published in November this year and after the publication of the statistics related to the developments of the housing rental market in October 1401, under the title “Third shock to rent prices”, he published on the same page, announcing the peak of rent inflation in the first month of this fall, from the intervention of the agent. Som announced the peak of monthly rent inflation. In this report, three important and effective factors in the peak of housing rent inflation were introduced, and one factor was identified as the new and main reason for recording the highest monthly inflation in this market.

Price fluctuations in the housing rental market are always affected by two important factors, namely the level of general inflation and the level of housing inflation. In fact, with the increase in general inflation and housing inflation, rent inflation will also increase and the rate of rent growth will increase. In October this year, this market was not only affected by general inflation around 50% and housing inflation at the border of 50%, but the effect of the currency shock also spread to the rental market and showed itself in the unprecedented growth of monthly autumn inflation in this market since 1992. gave In this report, it was pointed out that the foot of the dollar has been placed in the shoes of the autumn rental prices, and like some other markets, the rental market has also been affected by the autumn shock of 1401. In fact, in October this year and in a situation where the market is out of the peak period of tenant relocation, i.e. summer, under the influence of the change of season, the demand for renting housing has also decreased, and following the increase in the weight of capital purchases, a part of the purchased files have been released to the rental market. is, there was no reason for the peak of rent inflation in Iran and Tehran. However, the general inflation of nearly 50%, point-to-point inflation around the 50% mark of housing, and on the other hand, the effect of currency fluctuations, led to a monthly growth of 7% in housing rent in Tehran and the country. In fact, in addition to general inflation and high housing inflation, the currency jump also signaled and affected the rental market following the significant growth of the dollar price.

But in November, at the same time and nationwide, housing rent inflation in Tehran and the country fell and entered the decline phase. The monthly housing rent inflation in Mehr this year was equal to 7% both in Tehran and in the country; This amount has dropped significantly in Tehran and the country in November. This means that the rate of rent growth will slow down and rent inflation will fall from the monthly inflation peak. The monthly housing rental inflation in Tehran and the country has decreased in November compared to October this year. Point-to-point inflation of housing rent in Tehran city reached from 41% in October to 39.8% in November. This rate decreased from 46.8% to 45% in this period of time in the country (October to November 1401). In fact, this fall of inflation was observed in the November rental market not only in Tehran but in the country and not only in terms of monthly inflation but also in terms of point-to-point inflation in this market.

Tenants and their problems with rent

Although the growth rate of housing rents decreased in mid-autumn, this does not mean that rents will decrease in November or that the conditions of tenants in this market will improve. Both the riyal level of rent and the inflation (growth rate) of rent are still high and are in a situation that exceeds the financial affordability of many tenant households. In other words, the conditions in the rental market are still difficult for the tenants despite the decrease in the rate of rent growth in November, and the growth of the rent is beyond the ability of the tenants and is higher than the normal level of the normal years of the housing market. This high level can be explained by the high general inflation rate and the level of housing inflation, while factors such as inflationary expectations following the currency jump have affected this market. For this reason, even in the situation that in November, rent inflation has decreased from its peak in October, and on the other hand, due to the change of season, the demand in this market has decreased, but still, the applicants of this market with the proposed rent price are often higher than their financial and economic ability. They are facing each other. However, the decrease in the rate of rent growth in November is considered a positive sign in this market for tenants and shows that, at least in terms of the rate of rent growth, the conditions in mid-autumn have not worsened compared to the beginning of this season.

The most important reasons for the decrease in rental growth

While official statistics show a decrease in the rate of rent growth in November, the results of field research show that “decreasing the power of mandated intervention in the mechanism of housing rental transactions” is the most important reason for the decrease in rent inflation in November. Since July this year, with the aim of curbing inflation in the rental market, a resolution was approved, but it actually messed up the natural equation of the relationship between landlord and tenant in the market. This resolution had two important pillars. First, it had recognized the right to unilaterally extend the rent contract for the tenant and required compliance with the ceiling of 25% of rent growth in Tehran and 20% of rent in the country.

In terms of the rent increase ceiling, the market did not follow this mandated ceiling and in all months, the rent experienced a growth of more than 40%. However, determining the possibility of unilateral extension of previous year’s contracts for tenants led to fear and worry among landlords.

This concern led to the non-sale of some of the units purchased by investors to the rental market, and also caused some people who had sold their units to the rental market in previous years, fearing that they may no longer be able to evacuate their property. , they gave up their unit supply to the market.

Reduced demand for relocation in the fall

In November, both parties active in the rental market, i.e. lessor and tenant, relied on the reality of the market rather than relying on this failed resolution, and this issue reduced the concern of owners to supply to the rental market, and ultimately this increase in supply , was observed as the most important factor in reducing the rate of rent growth in mid-autumn. In fact, in the middle of autumn, both sides agreed to deal with the reality of the market and based on it, not with a resolution that is not compatible with the reality of the market.

The views of both sides of the market (lessors and tenants) have become weaker and contrary to the opinion of the policy maker who believed that the non-approval of this regulation would lead to an inflationary tsunami in the rental market, this diminution of its effect in the market is due to the increase in supply and the disappearance of the concerns of the owners. , was effective in reducing rent inflation. The second factor is related to the decrease in demand in the fall due to the change of season and the passing of the peak season of tenant relocation, i.e. summer. So that the mediators declare that now in some neighborhoods of Tehran, the number of files has exceeded the demand for rent, and this issue is caused by the effect of the change of season and entering the cold season. The third factor is related to the expectation of the return of monthly rent inflation from the historical peak. Since in October of this year, the monthly rent inflation peaked and hit a historical record, because the rate of rent growth in this month was higher than expected, there was an expectation of a decrease in rent inflation in November, and this event is also in the middle of the month. Autumn was implemented. Of course, in this context, we can also mention some other factors, such as the reduction in the weight of high-quality files in the autumn rental market.

Market changes are an effective factor in rent prices

But in the current situation, an important question is whether this fall of inflation in the rental market will continue? The answer to this question depends on the fate of three basic components in the recent developments of the housing rental market, and the policy maker must take the necessary measures in this field. The policymaker should be aware that the path of returning rent inflation to the normal level depends on curbing inflationary expectations, stabilizing the currency market, and implementing effective policies to stabilize general inflation and housing inflation. Otherwise, there is not much hope for rent inflation to return to a normal level and lower than the current level.

Source: the world of economy