The Effect of Speculation in Housing Market Volatility in Iran (1991-2008)

Housing sector has been witnessing some periods of boom and stagflation and huge increase of prices during recent decades. The periodical volatilities in this sector have led to some structural and sometimes sociological problems، so the analysis of market volatilities always has been in the attention point of policy makers. In this article using equilibrium equation and simulation technique، we are going to investigate the effects of speculation on the housing market volatilities، in Iran during a 17-year period from 1991 to 2008. Using genetic algorithms method and matlab software، the model has been estimated and simulated. The outcomes indicate that speculation’s motivation has been resulted from price expectations and analysis of price trends by investors in past periods which create a form of speculation demand on market. The demand for speculation has a significant effect on the creation of fluctuation in the housing market and causes some periods of booms and recession in this market. Also، by investigation the price elasticity of supply it can be concluded that the speeding up the rate of production and strengthen the supply side can be key factor in controlling volatilities of the market to meet demand of speculation.