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.