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Sanctions empty Tehran's poshest properties

By Reza Sayah, CNN
updated 4:21 AM EDT, Fri August 1, 2014
  • Luxury apartments in Tehran are lying empty despite investors looking to buy
  • Iran's economy has been heavily affected by international sanctions
  • Buyers are hoping prices go down and sellers are hoping prices go up

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(CNN) -- In one of the most exclusive neighborhoods in northern Tehran, a Japanese-inspired garden with mini-waterfalls welcomes potential buyers to a newly built luxury apartment.

The four bedroom, four bathroom unit boasts marble floors, a state of the art open kitchen, computerized lighting systems and amenities that rival five star hotels.

It's an apartment so posh visitors are required to wear sanitary shoe covers.

With a market value close to $3.5 million, the need for guests to tread carefully is understandable.

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"In my opinion it's worth it," says real estate agent Bahar Khalili. "It's one of the best apartments in Tehran. An exceptional building designed by the best developer in the city."

But for the past year this swanky home has sat empty without a buyer -- half the other units in the six-floor block are empty, too.

So are tens of thousands of other apartments throughout Tehran, all for sale but sitting vacant without buyers.

"Right now we have a lot of apartments that are not sold and sitting empty because of high prices," says Khalili.

Housing prices in Tehran soared beginning in 2012, soon after western powers imposed the toughest round of economic sanctions against Iran to curb its disputed nuclear program.

The sanctions were a huge blow to Iran's economy and when the value of Iranian currency took a nose dive and no one could figure out where the economy was going, many here poured their money into real estate.

According to political analyst, Mohammad Ali Shabani, "real estate became the best way to protect your money."

Khalili agrees with this sentiment. "This is the safest investment you can make today," she said.

"Real estate has always increased in value. We have one apartment that's increased roughly $1,000 per square meter in the past five months.

"If someone wants to invest in Tehran and knows what he's buying, it's almost (a) certainty that's a good investment."

But with Iran's economic future still looking hard to predict and many Iranians lacking buying power, the market is at a standstill -- sellers not selling because they're hoping prices go up. Buyers are not buying because they're hoping prices go down.

The outcome is a Tehran skyline full of empty apartments -- and investors still looking to buy and build despite very little demand.

"Sometimes you wonder how can people possibly build more apartments when nothing is selling," said Khalili.

But remarkably, it's happening in Tehran because until the economy improves and housing prices start to stabilize, they believe, real estate is the safest place to invest.

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