According to statistics, from 1370 to 1402, a comparison of the price of dollars, coins, land and housing shows that land has been ranked first in terms of efficiency, so that the price of land in Tehran has increased 3447 times during the last 32 years. The growth of 2892 times, housing has grown 1600 times, and the informal dollar has also grown 366 times. This is while the minimum wage of workers has increased 531 times during the same period.
It is clear that one of the reasons for the critical issue of housing supply for different income deciles is the very strong dependence on the macroeconomic conditions of the country, including high general inflation and the instability of the macroeconomic conditions, and this issue, both in the supply and demand sectors, plays a role in making the housing market critical. has had the first; Therefore, it is natural for the government to design a suitable mechanism for organizing the housing market, it should first pay attention to the stabilization of the macroeconomic conditions of the country. But in the meantime, an issue that cannot be ignored is the influx of speculative demands to the housing market and hoarding of land and housing by landlords. Although the inflationary conditions in the short term force people to hedge real estate and housing against inflation and stimulate speculative demands and enter the housing market, there are also many people in the Iranian housing market who, in terms of long-term inflation (at least 20% annually), They start hoarding housing. These people include both natural persons and legal persons.
A review of global experiences shows that taxes are levied by governments in different countries with various goals, including financing government activities, optimal allocation of resources, and controlling speculation. In the meantime, tax on the housing sector as one of the most important economic sectors has existed in many countries since the past years.
The land ranks first in efficiency
Along with continuous inflations and uncertainties governing the atmosphere of economic activities, the housing and land market has been one of the most unstable sectors of Iran's economy in the last two decades and has always been the focus of speculative motives of many investors.
The statistics regarding the growth of land prices in Tehran are very interesting. For example, while the price of land in the city of Tehran increased by 3447 times (about 345 thousand percent) from 35 thousand tomans per meter in 1370 to more than 121 million tomans in 1402, during this period the old design coin increased by 2892 times (about 289 thousand percent) from 12.5 thousand tomans to 36 million tomans, housing with a growth of 1,600 times (about 159 thousand percent) from 47.5 thousand tomans to about 76 million tomans (annual average) and informal dollars also with a growth of 366 times (about 36 thousand percent) from 142 tomans to about 52 thousand tomans by the end of the year.
Why the growth of land prices is higher than the growth of other indicators, Abbas Shakri and his colleague in an article entitled “Analysis of the growth of land and housing prices and its relationship with some macroeconomic variables of Iran” discuss this issue from the perspective of demand and liquidity. have checked
These two economic researchers write in this regard: “In clearer terms, land and housing as a capital good that provides the flow of real estate services is one of the productive and important sectors of the economy. But when its speculative aspect intensifies and enters the portfolio and makes large profits for a few, it raises the opportunity cost of productive resources and reduces the contribution of productive economic factors, and worsens the functional distribution of income and becomes unproductive.
Housing price jumps have undoubtedly been possible with liquidity integration; Therefore, the growth of liquidity has undoubtedly been effective in creating unprecedented jumps in the housing sector. But the speculative nature of the activities of this sector has caused the boom in the purchase of land and housing to stimulate passive money and affect the quantity and quality of liquidity. As the graph shows, while the growth is in the same direction, the price of land and housing has been much higher than the growth of liquidity in the last two decades. The main reason for this difference is that a relatively larger share of liquidity has been spent on land and housing transactions.
Shakri and his colleagues believe that basically one of the reasons that the liquidity injected into the economy according to the stable rule and one-to-one relationship was not reflected in the price growth and in some years the growth of prices after the limited growth of the GDP was much lower than the growth of liquidity is that the liquidity Formally and informally, much more than the normal ratio has been injected into the housing sector. The symmetry of the bowl-shaped trends of the ratio of liquidity to GDP and the ratio of the housing price index to the total price index clearly confirms that when the ratio of liquidity to GDP increases and more liquidity is injected into the land and housing sector, the land and housing price index is higher than the total price index. will be
Guaranteed windfall benefits of housing and land
One of the valuable data that the Central Bank of Iran publishes in the field of housing is the data related to the construction activities of the private sector in the urban areas of the country. In this data, the Central Bank of Iran has provided many details of the construction process, the number and quantity of construction and construction costs for the years 2015 to 2015.
Analysis of Central Bank data shows that the share of land in the total price of buildings started by the private sector in the urban areas of the country has increased from 43.4% in 2005 to 51-53% in 2011-2014. This value was between 48 and 49 percent in 1394 to 1398 and in 1399 it even recorded 52 percent. In 1400, this amount was 47.4% in the whole country. But in Tehran province, the share of land in the total price of housing increased from 54.4% in 2005 to 63-64% in 2013 and 2015, and this amount was 56-59% in 2013-2018, and 65% in 2019. 8% and in 1400 it was 64.7%.
It seems that the decrease in the share of land in the total cost of housing under construction during the year 1400 is actually due to 1- the relative calm in the dollar market and 2- compensating for the residual growth in the price of construction materials.
Housing researchers believe that in order to manage the land market, one must first know the factors of housing price fluctuations. According to the researchers, part of the increase in residential land prices can be explained by general inflation, but its extra jump cannot be explained by general inflation and changes in the general level of prices.
Based on this, some researchers believe that there are various reasons for government intervention in the urban land market: 1- the inability of the market mechanism to optimally allocate urban land resources and its use, 2- lack of free flow of information and 3- lack of public satisfaction. Researchers believe that the government cannot be indifferent to the issue of land, but regarding the quality of the government's exposure and intervention in the land market, there are different views in the country.
Some of the country's researchers have given more weight to the supply side factors and believe that if the government solves the issue of land supply by increasing the urban boundaries, establishing residential settlements and new cities, and most importantly with “zero land” projects such as Maskan Mehr (Ahmadinejad government), national action housing (Rouhani government) and the national housing movement (Presidential government), as a result of this action and the reduction or removal of the land price from the cost of housing, cheaper housing will reach the people. But some other researchers say that the first problem of housing price jumps is not only on the supply side, and governments should also think about the demand side. According to them, the first and most important issue in the country is to find a solution for inflation, which has caused all consumer and capital assets, including land and housing, to become investment tools and even speculation.
In the second stage, the government should use effective tax tools such as annual tax on land and surplus housing and hoarded housing to prevent liquidity from entering these sectors and drastically raise the cost of maintaining these assets.
A look at the trend and composition of tax revenues of Iran's housing sector in the period from 1366 to 1400 shows that the tax revenues of the housing sector are the total annual property tax, vacant house tax, barren land tax, inheritance tax, goodwill transfer tax, real estate transfer tax and tax It is defined on real estate rental income. The combination of these data with the total tax revenues of the country from 1366 until now shows that the tax share of the housing sector in the government's tax revenues (including all tax revenue bases, including import tax), from about 7.4% in 1366, to 8.6% in 1367, 7.7% in 1368, 6.9% in 1369, and 5% between 1370 and 1374, reached about 2.3% by 1400.
In other words, the share of the housing sector in the government's tax revenues has fallen by 70% from the 1360s to the 1400s. (from about 7% in the 1360s to around 2% in recent years). However, comparing the share of housing tax with the share of salary tax (public and private sector employees) shows that while the share of housing tax has increased from about 7% in the 1360s to 2% in recent years, during the same period, the share of tax paid by employees (salary tax and wages) on average during the last 36 years 11% and its changes fluctuated around the range of 10-12%. Also, while the country's workers have increased during the same period, the number of housing in Iran has increased and the prices have skyrocketed.
Another point to consider is that during the past four decades, while the share of housing tax in government revenues has decreased by 70%, during this period, the share of consumer and capital demands in the housing sector has gone from 75% for consumption and 25% for capital in the 1360s to 25% for consumption and 75% for capital. has changed
Asset price transmission channels to the real sector and inflation
Traditionally, in inflation targeting, only the prices of goods and services are considered, but there are many reasons that compel central banks to pay attention to other prices as well. Paying attention to the price in other markets, especially after crises such as the financial crisis in Southeast Asia since 1997, when the discussion of the necessity of creating financial stability and the insufficiency of monetary stability for monetary policy became very important, as well as the economic turmoil in Japan in the 1980s or the rapid increase in asset prices. In the late 90s, it became more important in America.
Fakhri Muhaddith states these reasons in a research entitled “Calculation of asset price index and investigation of its effect on inflation”. Asset price inflation creates a wealth effect. Consumers start spending more when they feel richer. High stock prices cause firms to spend more on investment, so rising asset prices are a signal for future wholesale and retail inflation. On the other hand, to the extent that assets generate income in the future, their increased prices mean that there will be more consumption expenses in the future; Therefore, asset prices should be included in a more comprehensive measure of inflation.
An increase in the price of an asset outside of its long-term trend can cause a price bubble and when this bubble bursts, it can initially cause a lot of borrowing by financial institutions and eventually cause them to go bankrupt and disrupt the market. Also, when this bubble bursts, a sudden decrease in the value of shares or It pursues real estate and causes loans paid by receiving collateral such as listed assets to become unsecured loans, thus potentially damaging banks, as happened in Japan and East Asia.
Asset prices also play a role in the money transfer mechanism; Therefore, monetary authorities can choose a weighted average of inflation and asset prices as a target when the asset price bubble grows, providing risks in the formation of higher inflation. The bursting of these bubbles causes financial instability and loss of earnings. When assets are used as collateral, their price bubbles can lead to an increase in credit, which in turn can lead to an increase in the price of related assets, and the cycle of asset price increases continues.
When asset prices suddenly fall, firms face serious financial constraints, such as a decline in the value of their collateral, in which case lenders become reluctant to lend on a scale that preceded asset prices. These fluctuations can significantly affect economic activities.
Asset price transmission channels to the real sector and inflation
According to Fakhri Muhaddith's research published under the title “Calculation of asset price index and its effect on inflation”, in the case of sticky commodity prices, monetary impulses are first transferred to the real sector through changes in asset prices, and asset price fluctuations can increase the growth of the real sector. and affect money. In most of the early models, such internal connections between asset prices and the money sector are explained by introducing short-term interest rates and exchange rates. In general, the transfer of asset price inflation to commodity price inflation can be done both through aggregate demand and through expectations created from the future trend of inflation and output, assuming that the current price of an asset is the discounted value of the income stream generated by that asset. explained The nature and speed of the transfer depends not only on the share of assets in the wealth of the private sector, but also on the level of development of the economy, especially its financial market.
With the increasing convergence of markets, the imbalance in the property market is easily transferred to other markets. For example, excess liquidity tends to reduce short-term interest rates, which creates excess demand for stocks and, as a result, increases their prices; However, when the interrelationships of asset classes (currency, gold, real estate bonds, etc.) increase among themselves as well as with real variables, the transfer process becomes ambiguous and complex. It has also been proven that asset prices are very volatile and sensitive to investors' desires and completely independent of any changes in structures.
As a result, it is almost impossible to extract accurate and correct information from any observed change in asset prices. Housing is one of the main components of the total wealth and in many countries it has a significant weight in the consumer price index. In general, the housing sector is a volatile and sensitive sector to business cycles, and real activity in the housing sector is a leading indicator of economic activities. Known. In the case of America, Stock and Watson in 1989 and 1999 state that housing prices can be used to predict real activity and inflation or both.
Source: Economy Online
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