Urban housing markets in semi-arid regions face increasing vulnerability as water scarcity reshapes economic behavior, investment patterns, and long-term urban stability. In Tehran, prolonged droughts, declining precipitation, falling groundwater levels, and sharp reductions in reservoir storage have created hidden risks for housing affordability and asset security. These risks are further intensified by sanctions, weakened middle-class purchasing power, and the redirection of capital from real estate toward gold and foreign currency. Understanding the water–housing nexus is therefore essential for designing sustainable urban and economic policies.This study applies advanced machine learning models to estimate the impact of worsening water scarcity—particularly declining reservoir levels and precipitation—on Tehran’s housing market. The analysis integrates historical housing prices with hydrological indicators, including reservoir storage trends, precipitation variability, and groundwater decline, combined with socio-economic variables. A comparative assessment with Phoenix, Arizona—a semi-arid U.S. city confronting similar hydrological pressures—provides cross-regional evidence and highlights structural differences in water governance and urban policy. Scenario simulations predict how housing demand, price trajectories, and investor behavior shift under varying intensities of water shortage and management strategies.Findings show that continued reductions in reservoir storage and precipitation could trigger a delayed but rapid 10–15% decline in Tehran housing values over the next 3–5 years, driven by investor retreat and liquidity contraction. Meanwhile, northern provinces such as Gilan and Mazandaran may experience 12–20% price growth as households redirect capital toward water-secure regions. In contrast, Phoenix exhibits only 5–8% price variation under comparable hydrological stress, reflecting stronger water governance, diversified supply strategies, and more resilient planning.The results highlight the urgency of integrating water management with urban economic planning. Without intervention, Tehran risks transforming housing from a stable asset into a high-risk investment, accelerating spatial inequality and migration. The study provides an AI-driven early-warning framework for policymakers, urban planners, and financial institutions seeking to strengthen resilience in water-stressed metropolitan regions.
Sohrabi Mohammad (Tue,) studied this question.
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