Draining the growth of the dollar rate in the housing market

Draining the growth of the dollar rate in the housing market
The increase in the price of the dollar always affects the financial markets and in the medium term will cause the markets to face price jumps, and therefore, the country's liquidity will also increase and as a result, we will witness inflation growth in the country. In an interview with "Hammehin", economic expert Peyman Molavi examines the impact of the increase in the price of the dollar on the markets.

The Central Bank has not announced the average housing price since August, but estimates show that the price per square meter has reached 90 million Tomans. At the same time, the price of the dollar has also increased. In your opinion, how much is the increase in housing prices likely to occur with the increase in the price of the dollar and will liquidity be removed from the market?

Two main factors affect the housing market: first, the currency shock (increase in the price of the dollar) and second, the real interest rate. The interest rate on government bonds has reached about 32 percent and the rate on bank funds has reached more than 30 percent. This real interest rate (the difference between the risk-free interest rate and inflation) is close to zero. In this situation, the housing market is moving towards a real recession; a recession that is not accompanied by an increase in prices and may also be accompanied by a decrease in prices.

The factor that delays this recession is the depreciation of the rial against the dollar. The dollar has lost up to 50% of its value against the rial, which increases inflation and fuels price increases (in a stagflation-inflationary manner). It is expected that by June, we will see a partial evacuation of demand for dollars in the housing market; especially for properties smaller than 100 meters, but this evacuation will not be complete. The reasons for this are: a real interest rate close to zero, unfavorable economic and political conditions, and investors' desire for assets with higher liquidity (such as coins, gold, and digital currencies).

The stock market index reached the 3 million mark in January, but has been on a downward trend. What is the reason for this downward trend and do you think the stock market will be positive by the end of the year?

The initial growth of the stock market was related to the increase in the dollar price (from 35,000 tomans to 72,000 tomans), which affected listed companies. However, the increase in the price of energy carriers (gas, electricity, water) and blackouts affected the performance of listed industrial units. The outflow of investors also fueled the downward trend of the stock market.

Currently, stock market activists are mainly professionals and have sufficient knowledge of the market. In my opinion, the Tehran Stock Exchange and the OTC have reached a point that is suitable for professional investors to enter. However, the uncertainty of the political and economic outlook causes hesitation. International and domestic political factors will also fundamentally affect the stock market index. The profit margins of listed companies in 1402 were high (some above 50 percent) and many had high dividends. But in 1403, rising prices and closures will reduce companies' profit margins (to 25-50% less than this year). Overall, the stock market is at the bottom in terms of value, and competing markets (gold, digital currency) look more attractive.

What impact will the coin auction by the Central Bank have on the coin and gold market? Can it reduce the bubble in the long term and lower prices?

The impact of the coin auction by the Central Bank on the coin and gold market will be insignificant and very small; like pouring yogurt into the sea to make dough!

The currency price has reached 93,000 Tomans, and the gap between the free market dollar and the Nima rate is more than 30%. In your opinion, will the government have a plan to reduce or control the dollar price in the medium term?

Currently, maintaining the status quo (current dollar rate) is considered a great achievement for the government. Liquidity growth reached 28% in Aban 1403. However, a more likely scenario is a reduction in oil production (to 100,000 barrels per day), resulting in increased liquidity growth (to about 40 percent) and increased inflation (to 40-45 percent). This could push the dollar rate much higher than its current rate. Of course, this scenario is likely if economic policies are wrong. Given these conditions, the dollar rate of 94,000 tomans could be close to the bottom.