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Volume 0, Issue 0 (Articles accepted for Publication 2024)
Aim and Introduction
Over the past few decades, the housing market has experienced recurrent boom-and-bust cycles and considerable price volatility. A significant portion of this volatility can be attributed to speculative activities. Speculators often purchase properties with the expectation of future price increases, which contributes to the formation of housing price bubble. These bubbles not only destabilize the economy but also lead to serious social consequences. As such, policymakers have consistently focused on identifying the determinants of speculative behavior and housing market bubbles. One of the government’s regulatory instruments in this domain is the transfer tax, intended to influence trader behavior and mitigate housing price bubbles. This study investigates the effect of transfer tax policies on the housing price bubble in Shiraz city.
Methodology
This research employs an Agent-Based Model (ABM) to simulate the dynamic processes of the housing market and analyze the contributing factors to price bubble formation. The model incorporates four key agents active in the housing market: sellers, buyers (including both personal-consumption and speculative buyers), developers, and real estate agencies. Data and statistics up to the beginning of 1401 (2022) were incorporated into the model to forecast housing prices in Shiraz through 1409 (2030).
Three scenarios were tested by varying the proportion of speculative buyers—30%, 50%, and 70%—and applying different transfer tax rates of 1% and 5%. The simulation explores how these variables influence the magnitude and growth of the housing price bubble under different market conditions.
Results and Discussion
The findings reveal that, regardless of the proportion of speculative buyers, the implementation of transfer taxes can reduce the housing price bubble in Shiraz. However, the extent of this effect varies with market conditions. These results align with prior studies, such as Chen (2017) and Izadkhasthi et al. (2018), which found that transfer taxes can mitigate housing price volatility.
Proponents of transfer taxes argue that speculative activities drive housing price bubbles and that such taxes increase transaction costs, thereby reducing speculative trading and contributing to market stability. For instance, with a 70% speculative buyer share and a 5% tax rate, the housing price bubble decreased by approximately 25% between 1401 and 1409. In contrast, a 1% tax rate under the same market conditions led to a 22% reduction in the bubble. However, when only 30% of buyers were speculative, the tax had a comparatively more minor effect, indicating that the efficacy of the tax diminishes when fewer speculators are present.
Conclusion
The results suggest that increasing the transfer tax rate does not necessarily reduce the housing price bubble. In scenarios with 30%, 40%, and 50% speculative buyer presence, higher average tax rates did not result in a significant reduction in the housing bubble and, in some cases, slightly intensified it. This supports earlier warnings in financial economics literature—such as those by Schwert and Seguin (1993) – that excessive transaction taxes may deter informed traders, who play a vital role in maintaining market efficiency and price stability. Similarly, Friedman (1953) emphasized the stabilizing role of rational traders in financial markets.
According to the simulation results, Article 59 of Iran’s Direct Taxes Law, which stipulates a 5% transfer tax, may help reduce housing bubbles in Shiraz and potentially nationwide. However, the optimal tax rate should be adaptive and context-specific, considering the varying proportions of speculative and non-speculative market participants. Therefore, the government is advised to collect comprehensive data on the structure of the housing market, assess the share of speculative transactions, and adjust tax rates accordingly.
Moreover, since the transfer tax only applies to documented transactions, many informal or contract-based transactions—particularly those occurring prior to property completion—escape taxation. In such cases, builders may sell properties through promissory notes or undocumented agreements, which are difficult to track and tax. As a result, it is recommended that the government strengthen monitoring mechanisms for such transactions. This includes identifying and intercepting units exchanged informally or without official documentation to ensure both effective taxation and bubble control.
Volume 24, Issue 4 (Winter 2024)
The housing sector is one of the important economic sectors that, in addition to consumer demand, also faces demand from speculators due to its high capital return rate and low risk level. Speculators, motivated by the desire to profit from future price increases, refrain from offering their houses for sale, resulting in a housing vacancy. The presence of vacant houses reduces the housing supply and can lead to the formation of a housing price bubble. Imposing taxes on vacant houses is one of the government's tools to address this issue. The aim of this study is to examine the impact of taxes on vacant houses on the housing price bubble in the city of Shiraz.
Methodology
In this research, an agent-based model is used, considering four active agents in the housing market: sellers, buyers (including sellers and buyers with personal consumption and speculative motivations), developer, and real estate agencies, to investigate the dynamic processes of the housing market. To forecast the housing prices in Shiraz over an eight-year period, statistics and information by the beginning of 2022 have been incorporated into the model, and three different percentages of speculative buyers, including 30%, 50%, and 70% of the total buyers, along with different tax rates of 10%, 15%, 20%, and 25% have been considered.
Findings
The results of the research show that by applying a tax rate of 10%, if 70% of buyers are speculators, the highest growth rate of the housing price bubble was observed; that the decreasing growth rate was equal to 18%, that is, with application of tax on empty houses, the housing price bubble of Shiraz city in 2022 to the end of 2031 decreased by almost 19%, and after that the application of the tax rate of 15% in these conditions was approximately 17% which reduced the housing price bubble. But when the number of regular buyers is more than speculative buyers (30% of buyers are speculative), the application of different tax rates on vacant houses shows the least reduction effect on the housing price bubble. Therefore, when 70% of the buyers in the market are present in the market with the motive of personal consumption, the number of transactions is low. Since ordinary buyers will re-enter the market with a slight probability, and the majority of transactions are made by the 30% of buyers who are speculative, so applying the tax on vacant houses in the first year will cause a number of speculater to leave the market and the number of transactions will be less than before the tax was applied. In fact, mobilisation of the current stock of housing due to the tax may not have been high enough to affect prices which is consistent with Sego (2019).
Furthermore, the results indicate that increasing the tax rate on vacant houses does not necessarily lead to a further reduction of housing price bubble. When more than half of the housing market is in the hands of speculators, their power in transactions would be greater, and the increase in tax rate in the form of an increase in price will intensify the housing price bubble which could mean more transactions between traders. In fact, traders add tax to the price of the property, and increasing tax rates, in return worsens the bubble. So, here selecting the optimal tax rate becomes critically important. When less than half of the housing market is in the hands of speculators, the power of speculators will decrease as a result, which leads to further weakening of the price bubble. However, to a lesser extent when more than half of the market is in the hands of speculators, the price bubble will decrease.
Discussion and Conclusion
The research results indicate that the implementation of different tax rates, despite varying numbers of speculators, can lead to a reduction in the housing price bubble in the city of Shiraz, although the effectiveness may vary under different conditions. Moreover, it can create an appropriate income for the government, which can reduce the class gap by allocating and optimally directing the resulting resources towards the supply of housing for low-income groups. But the government should be careful in choosing the tax rate. It is necessary to set the tax rate on empty houses in such a way that renting the house or offering it in the market is more economical than keeping it empty by traders. In addition to the tax rate, choosing the tax base is also crucial. As mentioned in the text of the research, some countries consider the value of the property as the tax base instead of the rental income, or a fixed annual tax is collected
Volume 26, Issue 4 (12-2019)
This paper investigates the conflation of “Path” conceptual semantic in Motion events in the Central-Kurdish (Sorani) Language, Ardelani Dialect, in light of Talmy notions in this regard. According to Talmy, in each Motion event, four main elements i.e. “Figure”, “Ground”, “Path” and “Motion” are involved. These conceptual meanings can be lexicalized either on “Verb Root” or on “Satellite”. By considering a conceptual meaning like “Path” and investigating the surface element that shows it, we can define the typology of languages as “Verb-Framed” or “Satellite-Framed”. In this paper, after analyzing sample sentences containing “Path” concept, in addition to showing the way this concept is lexicalized in Kurdish, we would define typology of Ardelani dialect among Indo-European languages. Data used in this paper is a selection of 23 sentences extracted from a corpus of 890 sentences containing Motion event that have lexicalized Path concept. These sentences have been produced by 18 different native Ardelani speakers in three different groups.
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