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Yes, the analysis of Tehran's property market is included in our pack
Tehran's rental yields currently range from 1.9% to 6.7% depending on property type and location, with standard apartments offering the highest returns. The Tehran property market shows strong rental demand for smaller, affordable units while luxury properties face significant yield challenges due to high purchase costs and limited tenant demand.
As of September 2025, small apartments under 80 square meters in central locations deliver the best rental performance, with yields averaging 6.6-6.7%. The city's growing population, limited housing supply, and currency depreciation continue to drive rental income growth, making Tehran an attractive market for investors focusing on mainstream residential properties.
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Tehran rental yields vary significantly by property type, with standard apartments offering 6.6-6.7% returns while luxury units only deliver 1.9-3.3%. Small properties under 80m² perform best due to strong demand from young professionals and families seeking affordable housing.
Rental income growth has outpaced property price increases, with rents rising 42-50% in recent years while occupancy remains at 68% citywide, creating opportunities for well-positioned properties.
| Property Type | Average Yield | Monthly Rent (City Center) | Key Characteristics |
|---|---|---|---|
| Standard Apartments | 6.6-6.7% | $484 (1-bed), $1,014 (3-bed) | High demand, stable occupancy |
| Small Units (<80m²) | 6.5-7.0% | $341-$484 | Most in-demand segment |
| Luxury Properties | 1.9-3.3% | $926+ (houses) | High vacancy, limited demand |
| Near Metro Stations | 5.1-5.5% | Variable | Lower vacancy, consistent returns |
| Outside City Center | 6.71% | $341 (1-bed), $706 (3-bed) | Better yields, moderate vacancy |
| Short-term Rentals | 7.5-8.5% | Variable | Higher income but more management |
| Large Houses | 3.5-5.0% | $387-$778 (suburban) | Lower turnover, higher costs |
What are the average rental yields in Tehran right now for apartments, houses, and luxury properties?
Standard apartments in Tehran currently deliver rental yields between 6.6% and 6.7% as of September 2025.
These yields represent gross returns before expenses and vary slightly based on location. Properties outside the city center tend to offer marginally higher yields at 6.71%, while central locations average 6.62%. The Tehran residential market has shown consistent performance in this range throughout 2025.
Luxury properties face significantly different yield scenarios, delivering much lower returns between 1.9% and 3.3%. These premium units in north Tehran and other upscale districts struggle with high acquisition costs relative to achievable rental income. The luxury segment experiences stable or declining rental returns due to limited demand and elevated vacancy rates.
Houses and larger residential properties typically fall somewhere between these ranges, depending on size and location. Suburban houses outside central Tehran can achieve yields around 4-5%, while luxury houses in premium neighborhoods often mirror the lower luxury apartment yields.
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How do rental yields differ across Tehran's neighborhoods and districts?
| District/Area | Average Yield | Vacancy Rate | Key Characteristics |
|---|---|---|---|
| City Center | 6.62% | High | Higher rents but intense competition |
| Outside Center | 6.71% | Moderate | Better yields with stable demand |
| North Tehran (Luxury) | 1.9-3.3% | Very High | Premium area with limited rental demand |
| Near Metro Stations | 5.1-5.5% | Low | Mid-range apartments favored by commuters |
| South Tehran | 6.5-7.0% | Low-Moderate | Affordable housing with strong demand |
| Suburban Areas | 5.5-6.5% | Moderate | Family-oriented properties |
| University Districts | 6.0-6.8% | Low | Consistent student and young professional demand |
What's the typical rental yield difference between small and large properties?
Small properties under 80 square meters consistently outperform larger units in Tehran's rental market.
These compact apartments represent 40% of all property transactions due to affordability constraints and risk-averse buying behavior. Small units in central locations secure higher yields because of strong demand from singles, students, and middle-class tenants who cannot afford larger spaces.
Large apartments and houses face several yield-dampening factors including higher purchase costs, lower turnover rates, and relatively weaker rental demand. The Tehran market shows clear preference for smaller, more affordable units as economic pressures limit most renters' budgets.
The yield gap between small and large properties has widened in recent years as affordability becomes increasingly challenging. Small properties benefit from broader tenant pools while large properties compete for a shrinking segment of high-income renters.
What's the total purchase price including all fees, taxes, and registration costs?
Total closing costs typically add 4-7% to the headline purchase price when buying property in Tehran.
Agent fees represent the largest component at 2-3% of the sale price. Registration and legal transfer taxes add another 1-2% to the total cost. Additional expenses include notary fees, property inspection costs, and various administrative charges.
For example, purchasing a property listed at $100,000 requires budgeting $104,000 to $107,000 to cover all closing costs. This calculation becomes crucial for yield calculations since the total invested amount forms the denominator for return calculations.
Tehran benefits from having no ongoing property tax, which improves net yields compared to markets with annual property taxes. However, rental income faces taxation ranging from 19% to 25% after allowing for a 25% expense deduction, with some exemptions available for smaller residential units.
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How do mortgage rates and financing options affect net rental yields?
Iranian mortgage rates are exceptionally high, with government-backed loans reaching up to 28% annually.
These extreme rates make financing nearly impossible for most property investors. Monthly repayments often exceed average Iranian incomes significantly - a $19,200 loan over 12 years requires $400 monthly payments while average salaries hover around $140.
Most successful property buyers must rely on self-financing, family support, or alternative arrangements like partnerships and rent-to-own agreements. The high cost of local financing effectively eliminates leveraged investment strategies that work in other markets.
Net rental yields decrease dramatically when financed with Iranian mortgages due to the crushing interest burden. International financing options averaging 6.6% for 30-year fixed mortgages are generally unavailable for Iranian properties, forcing investors to approach the market with cash-only strategies.
This financing landscape actually benefits cash buyers by reducing competition and keeping property prices more reasonable than they might be with accessible financing.
What are the typical rental rates for different property sizes and types?
| Property Type | City Center Monthly Rent | Outside Center Monthly Rent | Size Range |
|---|---|---|---|
| 1-Bedroom Apartment | $484 ($333-$800 range) | $341 ($200-$700 range) | 40-60m² |
| 3-Bedroom Apartment | $1,014 ($700-$2,000 range) | $706 ($450-$1,050 range) | 80-120m² |
| Small Flat (Older) | $205-$230 | $215-$230 | 40-54m² |
| Luxury House | $926+ (north Tehran) | $387-$778 (suburban) | 150m²+ |
| Student Housing | $250-$400 | $180-$300 | 25-45m² |
| Family Apartment | $600-$1,200 | $400-$800 | 70-100m² |
| Premium Condos | $1,200-$2,500 | $800-$1,500 | 100-200m² |
Who are the main renter profiles and what do they prefer?
Young professionals form the largest renter segment in Tehran, seeking affordable apartments close to business districts and metro stations.
Students represent another major group, typically looking for small, budget-friendly units near universities. They often share accommodations to reduce costs and prefer properties with good public transport connections.
Low and middle-income families increasingly resort to renting due to homeownership becoming unaffordable. These families often crowd into smaller units or share larger properties to manage costs. They prioritize proximity to schools and work locations over luxury amenities.
Newly relocated workers within Iran create steady demand for rental properties, especially those offering flexible lease terms and furnished options. This group tends to favor practical locations over prestigious addresses.
Limited expat tenant demand exists, primarily from diplomats, corporate travelers, and foreign specialists who favor central and northern districts. However, this segment represents a small fraction of total rental demand compared to local renters.
What are the vacancy rates across Tehran and how do they impact yields?
Tehran's average occupancy rate stands at 68%, indicating substantial vacancy challenges especially in higher-priced segments.
Mass-market small apartments near metro stations experience much lower vacancy rates, often maintaining 80-90% occupancy throughout the year. These properties benefit from consistent demand from the large pool of price-sensitive renters.
Luxury properties and expensive units face significantly higher vacancy rates, sometimes exceeding 40-50% in oversupplied areas. North Tehran's premium neighborhoods experienced particularly sharp vacancy increases as rental prices outpaced tenant budgets.
Higher vacancy rates directly erode gross-to-net yield performance, particularly affecting expensive units and areas with oversupply. Properties priced above market demand face extended vacancy periods that can eliminate entire months of rental income.
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We did some research and made this infographic to help you quickly compare rental yields of the major cities in Iran versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What's the yield difference between short-term and long-term rentals?
Short-term rentals in Tehran offer 10-30% higher gross yields compared to traditional long-term leases, particularly in central and tourist-friendly areas.
However, higher gross yields come with increased costs including more intensive management, higher utility expenses, furnishing requirements, and platform fees. Short-term rentals also face greater vacancy risks and seasonal demand fluctuations.
Long-term rentals provide more predictable income streams with lower management overhead and stable occupancy. Residential districts favor long-term arrangements due to tenant preferences for stability and lower turnover costs.
The short-term rental market in Tehran remains relatively underdeveloped compared to international destinations, with legal constraints and limited tourism infrastructure affecting potential returns. Most successful short-term rentals target business travelers and domestic tourists rather than international visitors.
How have rental yields and property prices changed over the past 5 years?
Tehran property prices experienced explosive growth over the past five years, with increases of 101% in 2020-2021 and 85% in 2021-2022.
More recently, price growth moderated to 16.8% in 2024-2025, though this still represents significant appreciation. Smaller and more affordable units consistently outperformed luxury properties in both price appreciation and rental demand throughout this period.
Rental income growth actually exceeded property price increases in many segments, with rents rising 42-50% over the past 1-2 years. This rental inflation outpaced general inflation, particularly benefiting investors in key districts with strong tenant demand.
Interestingly, luxury unit prices in premium north Tehran areas fell sharply by up to 35% in the past year as affordability constraints eliminated much of the high-end buyer pool. This created yield opportunities for investors able to acquire luxury properties at reduced prices.
The divergence between mainstream and luxury market performance has become more pronounced, with smaller properties maintaining strong appreciation while luxury segments face price corrections.
What's the forecast for Tehran rental yields over the next 1, 5, and 10 years?
Tehran rental yields are expected to increase further over the next decade due to mounting demand and stagnant new construction supply.
Short-term forecasts for the next 1-2 years anticipate continued rental income growth as population growth and urbanization outpace housing development. Currency depreciation and inflation will likely drive nominal rental increases while constraining new supply.
Medium-term projections over 5 years suggest yields will remain elevated as ongoing housing shortages persist. Most new rental demand will concentrate in smaller, affordable units as economic pressures continue limiting tenant budgets.
Long-term 10-year forecasts indicate that ongoing shortages and economic pressures will sustain higher yields, though affordability constraints may increase vacancy rates in oversupplied luxury sectors. Middle-class and commuter districts near transit infrastructure will likely see the most stable and attractive rental returns.
The forecast assumes continued urbanization pressure, limited new housing supply, and persistent economic challenges that favor rental markets over homeownership expansion.
It's something we develop in our Iran property pack.
How do Tehran's rental yields compare with other major regional cities?
Tehran's rental yields of 4-8% gross (averaging around 6.5%) compete favorably with other major regional cities.
Istanbul offers similar yield ranges of 4-8% depending on district and property type, making both cities attractive for yield-focused investors. Dubai's yields vary widely but cluster around 5-7% for mass-market residential units, putting Tehran in competitive territory.
Tel Aviv delivers much lower yields, typically ranging from 1.9-3.3%, similar to Tehran's luxury segment but significantly below Tehran's mainstream residential yields. This makes Tehran more attractive for investors seeking higher income returns.
Within Iran, Mashhad and Isfahan actually outperform Tehran for rental yields due to higher tourism rates, better occupancy levels, and lower property purchase prices relative to achievable rents.
Tehran's competitive positioning benefits from its status as Iran's economic center, ensuring steady rental demand while purchase prices remain more reasonable than many international capitals.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Tehran's rental market offers compelling yields for investors focusing on smaller, well-located properties while presenting challenges for luxury investments.
Success in Tehran requires understanding local tenant preferences, avoiding overpriced luxury segments, and positioning properties to capture the strong demand from young professionals and growing families seeking affordable housing options.
Sources
- Numbeo Iran Property Investment
- Numbeo Tehran Property Investment
- Sands of Wealth Iran Price Forecasts
- Sands of Wealth Tehran Price Forecasts
- Sands of Wealth Iran Real Estate Market
- Sands of Wealth Iran Housing Forecast
- Iran Focus Housing Price Increases
- Iran International Housing Report
- Sands of Wealth House Price Iran
- Global Property Guide Iran Taxes