The road map for the housing exit from the inflationary stagnation – Tejaratnews
The publication of this report coincides with the inauguration of the new Minister of Roads and Urban Development, which contains several important messages for the housing policy makers to carry out operational and effective measures in the market in the two sectors of transactions and construction of residential units. After all the past years until now, experts and experts in the housing sector, while emphasizing the real factors of creating tension and crisis in the housing market, declared the policies applied in this sector by the governments to contain these crises mostly ineffective or lack sufficient effectiveness, at the same time With the beginning of the new management period in the Ministry of Roads and Urban Development, the Majlis Research Center has conducted a new analysis of the state of productive investments in the housing market and its consequences and negative consequences for the property market and the economy of the country and published the results.
40% reduction in productive investment
The estimates made in this report show a 40% decrease in the real volume of productive construction investments during the last decade. While in this report, the real growth of productive construction investments in the past decade has been announced as negative 5.2% per year on average. This is despite the fact that liquidity has grown significantly in all these years, but the real amount of its increase has not entered the sector of productive construction investments. The findings of this report show that the amount of investment in the building has reached 150 thousand billion tomans in 1390 from about 256 thousand billion tomans at the constant price of 1395. In this report, it is also reported about the outflow of capital from the country and its interception in the purchase of property in some neighboring countries, and it is also warned against the signs of the withdrawal of productive investors and builders, which all indicate the lack of a suitable platform for investment in this sector in the country. is the country
Three roots of supply stagnation
In this report, which has been published under the title “Investment challenges in the housing and urban development sector with a view to the formulation of the 7th plan”, the three roots of the stagnation of housing construction and supply have been pointed out and explained, and it has been stated that the consequences of these issues have caused the real estate market witness the push or exit of the key player for the entire market sectors, namely builders and construction investors.
The first root of stagnation in housing construction and supply in this report is “limiting all government programs in the housing supply sector to low-income housing” and not paying attention to this part of the market as a part prone to attract productive construction investments from the government. . In fact, the government’s policies and intervention in the housing market in the past years have been analyzed and investigated in this report as the first root of the stagnation of construction and investment.
As stated in this report: “In our country, until now, the housing sector has only been focused on providing housing for some low-income and middle-income groups, and basically, investment in the housing sector and housing production have been neglected. Due to the pressure caused by the lack of response to the needs of other parts of the society, it has become out of the reach of the low-income strata and turned into a place for investment. The natural process of investment has frustrated and disabled the private sector every year due to the increase in administrative bureaucracy and currency and inflationary shocks.
In this report, referring to the downward trend of housing construction in Tehran in recent years, it has been announced: the monthly average of housing construction in Tehran, which has always played an important role in the country’s housing market, is also decreasing. Also, it has been pointed out and announced that the housing policymaker has replaced ineffective positions and policies in the housing supply sector instead of relying on effective positions and policies in solving its problems: while the housing produced by the private sector includes those types of residential units in It is the positions and places where there is a need for housing (i.e. within the urban contexts), the housing plans implemented by the governments from the past until now are mainly implemented in the less effective positions in the market (i.e. outside the context of metropolises and big cities) and reducing The motivations of the private sector of the investor to produce housing cause a double impact and double negative consequences in the future of the housing market.
The effect of currency and inflationary shocks
In this report, the effect of currency and inflationary shocks is also mentioned as the second factor in reducing construction investment. The findings of this report show that currency and inflationary shocks have caused instability in the housing market. The growth of about 22 times the price of the currency has caused the growth of about 17 times the price of housing during the last decade. Meanwhile, construction builders and investors in the private sector have not found the possibility and opportunity to compensate amid the rapid growth of prices, and they have gradually been pushed out of the market under the influence of this issue.
The destructive role of speculators
In this report, the destructive effect of speculation and non-productive real estate activities in the absence of restraining tools and levers is mentioned as one of the important factors in the crisis in the housing and construction market, which can be considered as the third factor in the reduction of construction investment in the country and recession. The construction and supply of housing was mentioned. The findings of this report indicate that housing has always had a relative advantage over other capital goods due to security, and many people look at it as a product to deal with the inflationary shield and in many cases to earn profit without risk and cost.
At the same time, the structure of the housing market from an investment point of view is challenged due to the strictness of the laws and the lack of legal frameworks with enforceable capabilities and does not respond to various needs. Therefore, most of the housings produced in the past years have been limited to certain areas (mainly aristocratic) of the metropolises in high areas and most of the vacant units with the existing needs in the market do not have a quality that even if they are offered to the market, will lead to a noticeable decrease in the prices of the units in the market. The affordability of the citizens with average and low income will not be reduced, and the reason for this is the indirect encouragement of investments towards this model. Meanwhile, the lack of proper support and direction in the laws of the field of urban planning and correct tax signals has aggravated the consequences of this issue.
In the meantime, there are also some factors such as the bubble created in the market due to the executive policies of governments, the existence of exogenous factors, unforeseen shocks, instability in the financial and monetary markets, different efficiency of the markets, the structure of the economy and the intensity and weakness of regional demands and the weakness of laws and regulations in Speculative activities occur. Speculation accelerates housing exchanges in short-term periods of time to increase immediate and short-term profits, and this issue has a negative effect on the construction market and productive investments.
With the price increase as a result of speculative activities in the housing market, the effective demand, which is actually the consumption demand and as the last link in the construction and productive investment chain, is of key importance due to the jump in prices and the loss of purchasing power forced to the margins. The market is driven. In the absence of this effective range of real estate demand, practically the builders also face a crisis of effective buyers and the natural process of capital circulation is not provided for them. This issue is also one of the factors of the loss of motivation of builders for productive construction investment and aggravates the construction recession. From this point of view, the number of those driven out of the construction and investment market is increased.
This is despite the fact that by always emphasizing tax deterrent tools to deal with speculation and encouraging productive investment in the housing sector (construction) in general and in particular by announcing targeted approaches in the housing sector, it is possible to increase investment in this sector and benefit from the effects It was positive in the housing market.
Based on what is mentioned in this report, these damages, as stated in this report, have led to the expulsion and even migration of groups of builders and construction investors, and it is considered a new risk for the housing market. Because there is a risk that if these conditions intensify, even in a situation where suitable conditions are provided for investment and the return of builders to the housing construction and supply market, and the conditions for non-inflationary prosperity are also provided, the country will probably face a crisis of builder and investor shortage in this sector. will face
Three effective suggestions for policy makers
This report also mentions a series of executive proposals to improve the construction investment situation and thereby create better conditions in the housing market. The most important and key of these proposals can be summarized or classified in three sections.
The first proposal focuses on reorganizing the rules and regulations of urban planning as well as providing financial and urban development incentives for the construction and supply of affordable housing units for different classes. Based on this, it is necessary to focus on policies for the construction and supply of residential units with different areas from 30 to 80 square meters. The main need of today’s market is renting and buying housing from the middle and low-income classes, and on the other hand, due to the demand for this The units will also be favorable for investors.
The second policy is a kind of two-dimensional policy in the field of applying tax tools in order to create an obstacle in the path of speculators and encourage builders to invest in real estate in this market. Redefining tax laws with the aim of preventing speculation by imposing deterrent tax laws on the one hand and also applying tax exemptions for builders and construction investors to support housing production and construction should be on the agenda. While this procedure is now reversed; Builders pay construction tax, but speculators pay no tax on the benchmark cost.
In the third operational proposal presented in this report, the creation of financial instruments to participate in the pre-purchase and purchase of housing and short-term and medium-term financing of three to eight years is mentioned. Right now, the housing pre-sale market is practically blocked as a suitable financing method for builders on the one hand and a suitable method for homeownership from the most consumptive housing demand spectrum (first-time buyers) on the other hand. It is necessary to activate the second market of housing transactions (pre-sale) by amending the rules and regulations in this sector for the benefit of both the producer side and the consumer demand.
Source: the world of economy
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