Document Type : Original Article
Authors
1
Ph.D. student in Economic Sciences, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran.
2
Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
3
Assistant Prof , Department of Finance and Banking, Allameh Tabataba’i University, Tehran, Iran.
4
Assistant Professor, Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
10.48308/jem.2025.240618.1997
Abstract
A well-functioning, mature housing market is characterized by relative stability and reasonable price fluctuations. Housing prices emerge from the behavior of heterogeneous agents- fundamental end users and speculative traders. Building on this, we develop a stochastic dynamic general equilibrium model to analyze Iran’s housing market within a behavioral framework featuring heterogeneous traders (consumers versus speculators). The results show that the presence of speculators amplifies the asymmetry of price dynamics rapid run-ups followed by sluggish declines and depresses aggregate output. Moreover, housing booms and price appreciations can adversely affect final output through a substitution effect between housing and other goods. Policy wise, when volatility is chiefly driven by intensified speculative activity, fiscal instruments such as a wealth tax can enhance stability and improve social welfare. That said, the impact of such taxation is predominantly short-lived and, by itself, insufficient to stabilize housing prices over the long run; thus, combining it with complementary instruments particularly fiscal and credit policies is recommended for the sustainable management of the housing market.
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