Demand and Supply Side Variables and Housing Sector in Iran

Abstract

The purpose of this paper is to examine the relationship between bank loan rate and housing prices in Iran. For this purpose, some VAR models have been applied, using the following variables: real loan rate, money supply (including the high powered money and the liquidity), GDP, housing services index, and the number of licenses for new houses. The results show that a reduction in the loan interest rate will increase the demand for housing sector because of reduction in cost of borrowing from banking system in order to invest in this sector. In other word, the research findings have implied a negative relationship between bank loan interest rates and housing prices. The results have also revealed that financial repression in the form of bank loan rates control policy induces more investment in housing sector and results into resource depletion of banking system.

Keywords

• g12
• g12
• housing
• r21
• r21
• vector autoregressive model (var)
• e43
• house prices
• bank loan rates
• financial repression
• iran. jel classification: e43
• r31