The Effects of Municipal Tolls on Housing Price: A Case Study of Tehran

The housing sector plays crucial role in economic growth because of its strong forward linkages with other economic sectors. However, this sector has faced with sharp fluctuations in the housing prices across urban areas in the past two decades. Economic development is the main goal of each country with regard to improve living standards. In addition, the urban development is an important source of national development. Municipalities are associated with the housing sector due to their linkages with urban construction projects. The different factors affect housing prices. Using a Vector Auto-Regressive (VAR) model, this paper aims to examine the effects of paying tolls on housing prices in Tehran, capital of Iran. Applying quarterly data over the period 2005-2013, the estimation results indicate a unidirectional causality relationship running from housing price to housing renovation tolls. In addition, this paper finds a unidirectional causality relation running from housing price to total housing tolls. The other finding of this research is a unidirectional causality link from renovation tolls to total tolls in the housing sector.