The impacts of reducing interest rate on housing market
ISNA: Regarding the effects of possible rate cuts on housing market, Seyyed Mohsen Tabatabaei said, two monetary and fiscal policies are used in economics by policy making institutes for influencing and directing macro-economics. They can have several impacts on key variables of economy like inflation rate, liquidity, employment, GDP, and also functioning of markets, such as currency, housing and capital.
Contractionary policies were adopted in money market with the aim of controlling inflation in the 11th government leaded to decrease inflation rate over the last two years in economy. Money and Credit Council ordered to decrease interest rate because of current condition in society, need to invest and economic boom, and also inflation rate reduction.
Maximum of interest rate of deposits proportional to the period of deposit with a maximum one year due equivalent to 20% and the maximum loan interest rate of non-participatory contracts for banks and credit institutions was determined 21% according to the council directive. This policy can influence on housing market from different aspects. Re-reducing interest rates can have various effects on the housing market.
Reduction of deposit interest and presentation of facilities with lower profit can cause mass-builders attempt to receive facilities once again. Housing industry with more than is associated with more than 300 other industries. If the housing market thrives, part of the recession could end in the country.
Currently, banks do not have good conditions to implement this policy. They have heavy differed both in public and in private sector which reduced payment facilities.
Rationed banking sources can grip challenges such as corruption. There is also another prediction in this regard. Due to general economic conditions, people cannot purchase home and actually there is not demand in the market and because of that mass producers are looking for housing investment and if facilities are taken, they will enter to other markets.
Most markets have stagnated in current condition of economy. Price fluctuations have decreased in the foreign exchange and gold market. Housing market can be a good place for investing and transferring free resources and it can increase supply of rental housing and change the decision of house sellers to rent them instead.
Due to the market downturn and the inability of people to pay rent, a marked decline will occur in renters who are generally middle class and low-income people.
