The construction sector had just recovered from a three-year recession but new housing loans extended by Bank Maskan (Housing Bank) also increased demand.

The boom in house prices of the last three years has eased.
Inefficient policies such as offering housing loans of 180 million rials to first-time buyersÐexcluding developersÐincreased prices due to rising demand.
The number of empty houses, dodgy deals and recession in the construction sector created a housing market bubble.
According to the Persian daily Qods, the situation was so serious that the Minister of Housing and Urban Development Mohammad Saeidi-Kia-under public pressure-had to report to the parliament for explanation while lawmakers urged the government to resolve the problem.

Reasons
This year people increasingly turned to investment in the housing sector rather than stock market or the once-lucrative mobile phone business.
For this reason, around 30-40 percent of house purchases were for investment and not for accommodation. Growing prices of iron, cement and construction equipment and facilities also contributed to price hikes.
The construction sector had just recovered from a three-year recession but new housing loans extended by Bank Maskan (Housing Bank) also increased demand.
Lawmakers recently blamed high inflation, declining per capita income and lower purchasing power for the chaos in the housing market.

Real Estate Bubble
A real estate bubble occurs when housing prices take a detrimental turn instead of rising gradually with inflation rate or rise in median income. It can happen periodically in local, national or global real estate markets.
When the bubble bursts, housing prices tumble, which cause the real estate market to collapse, often followed by a recession in that area. In a real estate boom, the cycle runs its course and a market correction takes place more gradually, with prices easing down to more realistic levels.
Like any type of economic bubble, identification is difficult
except in hindsight.

Causes
Whether it is a real estate bubble or a real estate boom, the rising cost of housing encourages homebuyers to take extreme financial risks.
The Economist Magazine says “worldwide rise in house prices is the biggest bubble in history“ and real estate bubbles are believed to exist in many parts of the world.
Unlike a stock market crash follows a bubble, a real-estate “crash“ is usually a slower process, because sellers do not to sell. Due to inflation, prices do not fall in nominal terms; rather they stay “flat“ for a period of 3-5 years.
Other sectors such as office, hotel and retail generally move along with the residential market, being affected by many of same variables
(incomes, lending rates) and also sharing the “wealth effect“ of booms.
To identify bubbles before they burst, economists have developed a number of financial ratios and economic indicators that can help evaluate whether homes in a given area are fairly valued. By comparing current- to previous levels that have proved unsustainable, a guess can be made whether a given real estate market is experiencing a bubble.
Indicators describe two interwoven aspects of housing bubble: a valuation component and a debt or leverage component. The valuation component measures how expensive houses are relative to what most people can afford, and the debt component measures how indebted households become in buying them for home or profit and also how much exposure banks accumulate by lending for them.

Crisis Management
Reports reveal that the government is to ratify the comprehensive
housing plan in cooperation with the Parliament and Ministry of Housing and Urban Development aimed to control the situation.
The plan consists of 55 programs that could help improve the situation in the housing market, both in rural and urban areas.
Under the plan government will be obliged to build 50,000 housing units for renting out which is expected to reduce house prices extensively.
Another aim is to build one million housing units, which if implemented, could greatly impact the housing market.
Another policy, which is still under government review, is to reduce and correct house prices.

Countdown
Experts and concerned officials involved in the housing market say that prices are gradually declining. For instance prices have fallen between 10-15 percent in cosmopolitan cities like Tehran and Mashhad. This is good news for first-time buyers but they are still waiting to see when house prices will become real.
Head of Real Estate Agencies Cooperative in Mashhad, Zohourian said prices of apartments and residential units have significantly declined in Mashad. However this is attributed to the government policy and the comment by President Ahmadinejad who promised to establish a special committee to resolve the crisis.
Zohourian said the decision to grant housing loans of up to 180 million rials encouraged people to enter the housing market. The policy partly helped resolve recession, but pushed up prices due to rising demand.
If the government continues its current policies prices will be stable next year too (starting March 21, 2007). The supportive policies of the government to hand over land to developers also helped reduce prices to some extent.
Another cause why prices fell by up to 10 percent in certain places was that profiteers and opportunists continued to raise prices despite lack of demand.
The market is currently in recession. There are sellers but not many buyers. So people presume that prices will not rise any further. The government’s new policies will help burst the housing bubble.

Stable Year
Head of Real Estate Agencies Cooperative in Tehran, Mostafa Qoli Khosravi said a new housing deed plan is also under way in cooperation with the Judiciary and Commerce Ministry.
The directive will be submitted to real estate agencies to stabilize the market.
It aims to stop illegal real estates from operation and to reduce unregulated activities in the sector.
According to him house prices will continue to fall between 10-15 percent in the capital and different regions even next year now that the government has promised to stabilize the market.
On declining prices, lawmakers say excess liquidity is now
shifting towards the gold market, investment sector and long-term saving practices. This has helped control the situation to a certain extent.
They say excess liquidity can be directed towards the cooperatives to stabilize the real estate market.

Good News
Many buyers have stopped purchasing new homes extending the current housing recession now that news suggests prices will not rise next year. Developers say since recession has also reached the construction sector it will continue through next year.
It is difficult to predict the performance of housing market.
Falling prices might be good news but it can also mean buyers will wait for further decline before buying a residence.
Housing experts and lawmakers are asking people not to rush to buy houses.
Although prices have fallen the government and parliament should devise more efficient policies to stop the return of real estate bubble.

Iran has efficient human resources and can boost digitalization and improve its status in economic, social, cultural and political areas.

An electronic city is a place where people have electronic access to governmental organizations, economic units, cultural and health centers round-the-clock through information and communications technology (ICT) confidently and safely.
E-city enjoys an advanced telecommunication infrastructure where people communicate via personal computers (PCs) with houses, schools and other entities. In a “smart city“ such as London, Vancouver and Tokyo information and services are rendered electronically.
Electronic cities are established on e-government, e-commerce and e-learning infrastructure. E-commerce is indispensable to the electronic world where large stores world over sell products via Internet and big companies conduct transactions through World Wide Web. For example Americans spent more than $100 billion on online shopping in 2006.
In an e-city, e-learning is the basis of economic growth and improvement of workforce. Technological infrastructure, human resources and cultural background are prerequisites to reaching e-government, e-commerce and e-learning as the base of an e-city.
According to Moj News Agency, the number of high-speed Internet ports reached 220,000 in the last Iranian year (ended March 20,2005). This is while the government was obliged to increase it to 1.5 million under the Fourth Economic Development Plan (2005-10) recording penetration rate of 30 percent for Internet users and 43 percent for date users estimated at about 31.6 million people.
Internet users have increased from 200,000 in 2000 to 11.2 million in 2006. The government is pursuing plans to raise the number of Internet users to 30 out of 100 people by 2010.
In 1996, the rate of sending and receiving information had hit two megabytes which has now reached 7,000 megabytes.
Located at the heart of a 400-million-strong Internet user circle of neighboring states Iran can use the opportunity to act as a regional hub for the Middle East.
This is while the Information and Communications Technology Ministry has finalized the second phase of the project to connect Iranian universities and higher education institutes across the nation to the fiber optic network.
Health, research and education centers will be connected to fiber optic network to avail high-speed Internet services.
Information Technology (IT) estimate 0.3 percent of Domestic Gross Product.
While global average estimate there should be nine PCs for every 100 people there are seven PCs for every 100 Iranians.
Digitalization is an important index in an electronic or information society. Digitalization (or digital opportunity) is based on accessibility and financial capability of people to connect to broad-band Internet.
Iran ranks 94th in the world in terms of broadband Internet access, and occupies the 55th place of having registered in Internet Protocol (IP).
The country has efficient human resources and can boost digitalization and improve its status in economic, social, cultural and political areas.
Digitalization, electronic city and information society are major steps towards sustainable development.