The Effects of Real Exchange Rate on Housing Prices in Iran: A Spatial Analysis Approach

The aim of this article is to assess the effects of the real exchange rate on housing prices in 31 provinces of Iran by of the static and dynamic spatial panel model framework over the period of 2011 to 2020. The findings indicate a positive effect of the real exchange rate on housing prices in the provinces of Iran, which is consistent with the research conducted in this area. In addition, per capita income has a negative effect on housing prices, indicating the non-substitutability of food and non-food expenses in the household expenditure basket and the need for significant liquidity to afford housing. This finding is in line with the results of some other studies. Evaluating the spillover effects of housing prices in the provinces of Iran using static and dynamic spatial panel models demonstrates that a change in housing prices in one province affects housing prices in neighboring provinces. This result confirms the ability of housing shocks to spread at the national level. Furthermore, the evidence shows that the long-term spillover effect of the real exchange rate on housing prices is unstable, while in the short term, this effect is positive. Therefore, the overall effect of the real exchange rate on housing prices is positive in both the short and long term, and stability in the foreign exchange market will contribute to improving the housing market conditions.