Determinants of returns on housing: The Iranian case

Purpose: The purpose of this study is to investigate the determinants of returns on housing in Iran by analyzing capital appraisals, rents, and total returns. Design/methodology/approach: This study uses data from 28 provinces of Iran over the period of 2000-2007. Using generalized method of moments (GMM), the determinants of returns on housing in Iran are investigated. Findings: The empirical results indicate that in particular changes in inflation and population and to a lesser extent changes in unemployment and gross domestic product (GDP) are the important determinants of returns on housing. Practical implications: The findings imply that real estate investors in Iran can obtain higher returns from their housing investment if they invest in provinces that have positive changes in population, GDP and inflation and negative changes in unemployment rate. Originality/value: Most studies in this area cover US and European real estate markets (particularly office market). Since findings for developed countries might not be directly transferable to emerging market economies such as Iran, therefore, more work is necessary to obtain a clearer picture of real estate markets in emerging market economies.