62% Rise in Cost of Tehran Construction Materials

EghtesadOnline: The general price index of construction materials for residential units in Tehran rose 62.2% in the first quarter of the current Iranian year that ended on June 21 compared with last year's corresponding period.

News ID: ۷۴۸۰۶۹

04 August 2019

According to the Statistical Center of Iran's latest report published on its website, the index stood at 406.9 during the period.

The figure indicated an increase of 14.2% compared with the previous quarter, i.e. the fourth quarter of last year, which ended on March 20, 2019.

During the 12-month period ending June 21, the index grew by 56.3% year-on-year, Financial Tribune reported.

“Services”, with a price growth of 21.9% compared with Q4 of last year and coefficient of 25.58%, gave the biggest boost to the overall index in Q1. The index for this category, which witnessed a price hike of 29.6% YOY, stood at 342.5. Its price index grew 23.7% during the 12 months ending June 21.

The category of "cement, concrete, gravel and sand" ranked second with a price growth of 18.4% compared with previous quarter and a coefficient of 14.72%.

Its index hit 358 in Q1, which was higher by 57.1% compared with the same quarter of last year. During the 12 months ending Q1, the growth rate of this category's price index was at 34.1%.

The category of “lumber” was the third group with the biggest impact on the residential construction material price index in spring. In Q1, the group's index was registered at 564.5, which was higher by 11.5% compared with the previous quarter and 127.7% YOY.

In the 12 months ending June 21, the category experienced a growth of 121.8% in its price index and a coefficient of 7.79%.

Six-Year Overview

A look at SCI data for the past six years shows that the residential construction material price index has increased in five of those years.

During the fiscal 2011-12, the index slightly but continuously grew in each quarter.

SCI considers the index to stand at 100 during 2011-12.

Next year, the index stood at 116.9 in Q2 and grew to 131.6, 145.4 and 152.9 by the end of the year, indicating a 36.7% annual growth in the index that averaged at 136.7 in that year.

In the fiscal 2013-14, the Q1 index stood at 170.1, and slightly declined to 170 and 167 in the next two quarters only to rebound to 170 in the final quarter. The overall index increased by 23.8% with an annual average of 169.3.

In the next year, the index was registered at 178.1 during Q1 and continued to rise for the next two quarters, as it reached 184.4 and 184.7 before falling to 174.9 in Q4. The year's average index was 180.5 to register a yearly increase of 6.7%.

The fiscal 2015-16 saw a reversal whereby the index first increased to 178.3 and 178.7 in the first two quarters, but then fell to 176.1 and 175.7 in the next two. With an average annual rate of 177.2, the index contracted by 1.8%, the only time that has happened in the six-year period under review.

The fiscal 2016-17 saw the residential construction price index rise continuously, with quarterly numbers registered at 183.9, 186.6, 193.5 and 191.6 respectively. The index averaged at 188.9 during the year to register a 6.6% hike.

In the previous fiscal year, the index's growth became more noticeable as Iran's housing sector was beginning to come out of a five-year recession. During Q1, the index stood at 197.1 and continued to rise to 211.6, 216.7 and 223.1 respectively in the next three quarters respectively.

The index averaged at 212.1 for the entire year to witness a yearly rise of 12.3%.

The SCI uses the fiscal 2011-12 as its base year for all calculations in contrast to the Central Bank of Iran that last year upgraded its base year to 2016-17.

Construction Materials Sales on Credit

Bank Maskan, the state-run agent bank of Iran’s housing sector, will start implementing its plan to sell construction materials to homebuilders on credit at the start of the second half of the current fiscal year (Sept. 23), announced the bank’s CEO Abolqasem Rahimi Anaraki.

He noted that credit cards to buy construction materials will be issued to homebuilders at an interest rate of 18%, Mehr News Agency reported.

The plan covers the purchase of construction materials such as beam, rebar and cement, according to the official.

Minister of Roads and Urban Development Mohammad Eslami has been quoted as saying by Hibna that the project is aimed at reducing the end price of homes by controlling construction costs, maintaining the quality of construction materials and controlling the inflow of money into the housing market.

According to the minister, the credit ceiling will be based on the floor area.

A total of 326,000 residential units were constructed in Iran during the previous fiscal year (ended March 20, 2019)–40% lower than the critical need of the housing sector set at 550,000 residential units ever year by the government.

The Comprehensive Housing Plan’s surveys show housing supply needs to reach 900,000 units per year by 2021.

Housing supply between 2014 and 2017 stood at 370,000 units per year, much lower than the critical minimum needs.