Iran’s economy can be followed by some major indicators such as: inflation rate, interest rate, exchange rate, and gold and houses prices.
Inflation and Interest rate
The inflation rate after the presidential election of Iran (2014) declined so much, as seen in the chart below, in 2013, the inflation rate was 35% but after 3 years, it fell to 8.6%. Main reason of this huge decline was contractionary monetary policy. In the past, due to the lack of treasury bills, the main instrument for applying monetary policy was interest rate. It is showed in the chart below, after increase in interest rate, the inflation rate decreased.
It is important to notice that after many years, this is the first time that the spread between interest rate and inflation rate is widen too much, this spread leads to the reluctancy of people to do jobs or run new businesses.
Most Iranian are eager to invest in real estate sector, if we consider house prices in Tehran, price trend shows that house prices is always incremental.
After 2013, housing market in Iran entered to a nearly neutral phase, in this period (2014-2016) house prices growth was lower than inflation. In the table below the trend of Tehran`s housing market prices has been shown on yearly basis. Yellow highlights show rallies in house prices, it can be conclude that cycle of housing market is in every 4-5 years which means a rally occur in the end of this period.
Table 1- Yearly increase of Tehran house prices (percent)
Another reason for having a smooth house market is the balance of house numbers with family numbers it means that there is enough supply now, but it should be considered that due to the stagnation of market, many builders have exit from market and many young persons in Iran are living alone. (Please pay attention that the recent nose counting is done in Iran but its data is not released, yet. So after 2012, data are estimations).
After rate-hike by Fed, U.S Dollar has been appreciated. Iranian people usually for hedging the depreciation of Iranian Rial buy U.S Dollar or gold coin. Charts below shows the price of gold coin and ounce of gold. As seen in the below charts, movement of ounce is the same as global gold prices but the gold coin price in the past 3 months has increased, in contrast to the gold ounce. Main reason of gold coin price increase is using it as a hedging asset for covering the appreciation of Dollar.
In Iran, There are 2 exchange rates, one is the “official” and the other one is “free market” rate. Government tend to unify these 2 rates system in the coming months. Official rate is rising smoothly but also in the free market Dollar to Rial has strengthened.
Overall economy condition
Overall economy condition of Iran shows that now in Iran real positive rate compare to inflation is positive, this means you can earn money without risk. This condition cause less investment in businesses and encourage people to deposit their money at banks, so this is a big threat for economy growth.
In housing market because of balancing the family numbers and number of houses, still there is not any bright future, but with considering more young people which live alone and the decrease of new constructions and also getting near to the end of 4-5 year cycle of neutral phase of housing market, it can be forecasted that may be 1 or 2 years later housing market can move specially small houses.