Housing PMI at 7-Month High

PMI for the housing sector in the 11th month of the current Iranian year (Jan. 20-Feb. 18) settled at 64.28 from 58.33 in the preceding month (Dec. 20, 2020-Jan. 19), indicating a 10.2% increase, according to the report.

PMI is an indicator of the health of economic sectors. It provides information about current business conditions to decision-makers, analysts and purchasing managers. 

Raw material inventory, employment conditions, new orders, supplier deliveries and export/production conditions were among the criteria quizzed, yielding a final score of between 1 and 100. 

If a business scores 50, it means that no change has been perceived compared to the previous month, while scores higher or lower than 50 indicate that the business is booming or stagnating respectively. 

The survey includes 12 questions about business conditions and any changes, whether it be improving, no changes or deteriorating. 

It is measured through a monthly survey sent to senior executives of 100 companies active in the real-estate sector. It is based on five major survey areas: "new orders" with a coefficient of 30%, "raw material inventory" (10%), "production" (25%), "supplier deliveries" (15%) and "employment" (20%).

The "new orders" sub-index stood at 52.2 in the month ending Feb. 18, indicating a 3.14% decrease compared with 53.89 of the month ending Jan. 19. 

The "supplier deliveries" sub-index, which measures how fast deliveries are made, increased from 55 in the month ending Jan. 19 to 58.24 in the month ending Feb. 18, indicating a 5.89% growth. 

The "raw materials (construction materials) inventory" sub-index jumped 10.28% from 48.33 in the month ending Jan. 19 to 53.3 in the month leading to Feb. 18.

The "employment" sub-index increased 5.97% from 54.44 in the 10th month to 57.69 in the 11th Iranian month. 

To calculate housing PMI, seven secondary criteria were also surveyed by ICC, including "raw materials purchase prices", which stood at 64.44 in the month ending Jan. 19. The sub-index increased by 2.31% to stand at 65.93 in the month ending Feb. 18.  

"Warehouse inventory" improved by 15.65% to reach 41.76 in the 11th Iranian month from 36.11 in the 10th fiscal month. 

The "exports" sub-index settled at 48.35 in the month ending Feb. 18 from 47.78 in the month ending Jan. 19, registering a 1.19% increase. 

"Prices of products or services" dropped by 0.04% to stand at 52.2 in the month ending Feb. 18 from 52.22 in the month ending Jan. 19. 

"Fuel consumption" decreased by 13.23% from 58.89 in the 10th Iranian month to 51.1 in the 11th Iranian month. 

"Sales" went up by 27.36% from 44.44 in the 10th month to 56.6 in the 11th month.

And, "performance expectations for the following month" sub-index settled at 63.74 in the month ending Feb. 18 from 67.78 in the month ending Jan. 19, showing a 5.96% decline.

No Recession

Iran’s real-estate market is witnessing a decline in the number of home deals, which cannot be considered a recession, Beitollah Sattarian, a housing expert, says. 

“Demand for housing has always outweighed supply over the past 50 years; this trend will continue into the next [Iranian] year [starting March 20]. I believe all four indexes in the housing sector, namely the number of deals, price, production and investment, will grow next year,” he was quoted as saying by ISNA.

“The short periods of decline in the number of deals is not tantamount to recession, given that nearly 2,000 home deals were struck in the month ending Feb. 18 in Tehran. It is too early to think of such a decrease in home deals as a recession. Despite Covid-19 in Iran and the whole world, home prices in Tehran went up by 100%. The number of deals dropped suddenly, following the US presidential election in the month ending Nov. 20. Over 10 months to Jan. 19, the number of home sales increased by 23%, which is indicative of an investment surge in the market.”

Noting that the recent decline in the number of home deals is to blame on the political climate surrounding the Joint Comprehensive Plan of Action and the upcoming Iranian presidential election, Sattarian said the downturn is likely to continue into May and June but won’t last. 

“On the other hand, most producers are micro investors who lack long-term vision. Iran’s housing sector is not an integrated entity; governments have always failed to gather micro builders within one inclusive community, which is why we are constantly experiencing boom and bust cycles in the real-estate market,” he said. 

“The government has left construction industry to its own devices whereas half of the country’s money is in the housing sector. There are, in fact, two macroeconomic sectors in Iran: oil and construction. All other jobs are either directly or indirectly influenced by the construction industry.” 

CBI Report

Latest data released by the Central Bank of Iran show a total of 3,917 homes were sold in Tehran during Jan. 20-Feb. 18, registering a 70.5% decline compared with the same month of last year.

Compared with the preceding month though, the number of sales rose by 11.4%.

The average price of each square meter of a residential property in Tehran stood at 283.89 million rials ($1,135) during the month under review, showing an increase of 97.2% over last year’s same month, as average prices were registered at 143.97 million rials ($575). 

Home prices in the capital city increased by 3.7% compared to 273.86 million rials ($1,095) in the 10th month of the current year. 

During the 11-month period, the number of home deals finalized in Tehran totaled 78,030, which shows a 6.4% rise year-on-year. 

In the same period, the average price of each square meter of a home in the capital stood at 232.83 million rials ($909), signaling a YOY surge of 78.9% compared with the similar period of last year. 

The central regulator also reports changes to tenancy prices in the capital city and across the urban areas. 

According to CBI, the price of rented residential units in Tehran and across urban areas increased by 30.6% and 33.9% respectively during the 11th Iranian month year-on-year.