MASHHAD, Iran, March 3, 2015 – I am standing in pouring winter rain in land for sale that looks like a war-zone. The swimming pool is infested with algae; there’s a rusting metal pergola about to crash into the cracked cement below, and despite the denials of the owner, part of the land appears to be storage for scrap metal.

Yet, this 750-square-meter eyesore, at least an hour’s drive from the city center, costs 750 million tomans (about $220,000 USD) – a fortune to most Iranians, whose per capita monthly income hovers around $200 and no one but the well-connected qualifies for property loans.

Oblivious to the freezing downpour, the real-estate agent can’t stop waxing poetic. “You and your descendants will bless me in your prayers for generations to come for finding you this deal.”

He is not being totally disingenuous. To the typical Iranian any property anywhere will continue to rise in value. It’s an ingrained mindset here because nothing to the contrary has happened for nearly 30 years.

Until now. The oil price drop and the international sanctions imposed by western powers have essentially arrested the real-estate market.

But the result is a mere standstill, not the fire-sale one might expect elsewhere. Buyers are not buying because they’re hoping, against all odds, that prices go down. Sellers, unable to let ago of the fantasy that the real-estate boom is eternal, refuse to slash prices beyond the usual haggling.

And the standstill can continue because usually there is no bank to answer to; most real-estate is held by amateur investors using cash of their own or borrowed from family.

“Seven years ago I bought land for 100 million [$100,000 at the exchange rate at that time]; now the agents tell me it’s worth 1.1 billion [$323,000] and that’s after a year and a half of market dormancy,” says Mohammed Ajilchi, my brother-in-law.

“Why should I sell? In Iran, prices for every single thing always go higher.”

Property investment became the surest method of wealth protection not long after the 1979 Islamic revolution, as the country became isolated internationally, manufacturing and agriculture were overrun by cheap imports, foreign investment dried up, the government doubled-down on its control of the economy, corruption became rampant and society realigned in favor of a new class of less sophisticated cash-rich bourgeois.

As the population doubled to the current 78 million and urbanization soared, housing demand outpaced supply and real-estate prices began to skyrocket in leaps unheard of even in cities like New York or Tokyo.

The population turned into two distinct classes: those who bought and built their way to more real-estate wealth and those who sold their homes and didn’t replace immediately, succumbing forever to be renters, not owners.

Today, interest paid by banks and savings institutions can top 28 percent, but there is double-digital inflation and the value of the country’s Rial currency is unpredictable. In December 2011, it sank another 300 percent, which made commodities three times as expensive, which in turn caused real-estate to jump another 300 percent.

Without confidence in another investment method – the stock market, for example, is generally regarded as rigged – the wealthy continue to pour money into real-estate. Because of weak or malleable building laws, they are able to turn vast swaths of the cities into concrete jungles. The most ubiquitous structure hovering over Iranian cities today is not the minaret, but the construction crane.

Never-ending construction, seen here from a Mashhad alley. Copyright:
Never-ending construction, seen here from a Mashhad alley. Copyright:

When they run out of urban land, real-estate developers and speculators turn to the backwoods.

In the mid-2000’s, rural land prices shot up many folds, in some parts by 100 times or more, altering forever even the very fabric of society. Thousands of peasants sold their land and moved to the cities. For some, it was the very first time they owned cars or rode in elevators but without the skills to manage their unexpected wealth, many eventually became day laborers, sometimes on the very land they once owned.

In the Khorasan Province, “people were buying land in the middle of the desert, on top of mountains; land you couldn’t possibly use for anything,” Ajilchi said. “Prices were going up by the clock. You bought today and sold higher the next day.”

Prices also sank overnight, producing thousands of worthless checks written in the expectation of the easy flip. Many speculators went bankrupt, overwhelming the courts, their creditors on their tail, some even to this day.

But as steep the crash was – some of the bankrupt committed suicide – prices never returned to the pre-speculation levels, not by a long shot, and the entire population of the country, it seemed, had become real-estate agents.

“You wanna buy some land?” taxi drivers or hotel clerks might whisper to a tourist in the Caspian coastal areas, where even agricultural land costs at least ten times the pre-speculative era. The land’s produce might not be worth much. It’s the potential of someday wrestling-in building permits – “Oh, my cousin can get you any building permit” might be the other thing the taxi driver promises – to turn rice fields and orange groves into villas and apartment buildings.

The massive gainers and the forlorn losers perpetually cursing the day they sold, therein lies the nation’s obsession with real-estate and the seemingly immutable belief that despite the occasional setbacks, real-estate prices will always accelerate upward, that, in the words of a popular adage, “sellers always lose and buyers always win.”

“It’s a gamble with 75 million gamblers playing,” an acquaintance recently said. “We’re all in it and we have to be to survive. If the end ever comes, then who cares because we’re all going to be poor together and that won’t be anything new either.”