According to the recent reports which are published by officials, there are significant decrease in real estates` price. In fact, falling prices have been started since last few years however, in last few months this has become significant more than before.

Demand in housing market divide into two types: consumable demand and non-consumable. People with consumable demand purchasing a house as their shelter. These kinds of people consider their budget, the utility of residential unit so the market situation is their second priority and they blurt a smooth behavior facing with the market’s fluctuation. Non-consumable demand divide to two separate group, investment demand and speculation demand. Investment demand refers to a situation when people have a long-term point of view, expectation of price increase, hedging against inflation and receiving contractual rent are the main goals of these kind of investors. On the other hand, speculators have a short-term point of view. Whatever happens in recession and prosperity era causes an irrational behavior against demand rule. Therefore, increase in demand and overreaction leads to growth in prices so this cause economic prosperity and as a result the market provides a great opportunity for speculators.

According to aforementioned statements, speculation is a different approach comparing to investment, because speculators won’t exploit their house until they could find an opportunity to sell it in higher price. So, speculation is the most important reasons for creation bubble in housing prices. However, contrary to speculation disadvantages, this behavior increases liquidity in the housing market. overreaction of speculators in housing market might cause to speculative bubble in market but existing a reasonable speculative behavior is an integrated part of any market in favor of the liquidity.

Based on historical data, the speculative behavior in Iran’s housing market were undesirable and uncontrollable therefore, authorities should find out a solution in order to manage this kind of behavior. Volatility in prices provide an opportunity for speculators. In addition, lack of knowledge and transparency in housing market intensify its effect. In the past three years, volatility in prices was at the lowest level, so speculation demand has reduced dramatically.

To conclude, if the speculation behavior increase in Iran’s housing market, the liquidity will increase. However, according to population growth rate which has decreased in recent years, there is no hope for increase in demand in housing market unless we expect the inflation to grow again which has decreased significantly from 34 percent to around 9 percent in three years. This fact show that real estates are not an investment vehicle anymore.