Iran Housing PMI Improves 8.5%

EghtesadOnline: Iran Chamber of Cooperatives has measured the purchasing managers’ index (PMI) for the country’s real-estate and construction sectors, known by the Farsi acronym Shamekh, for the 10th month of the current Iranian year (ended Jan. 20).

News ID: ۷۴۹۶۲۴

05 February 2020

The new report shows PMI increased to 42.93 in the 10th Iranian month (Dec. 22, 2019-Jan. 20) from 39.56 in the ninth Iranian month (Nov. 22-Dec. 21, 2019), indicating an 8.52% improvement, Financial Tribune reported.

The index stood at 44.30 in the seventh Iranian month (Sept. 23-Oct. 22) when the first PMI report for the housing sector was published by ICC.

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 levels, employment conditions, new orders, supplier deliveries and export/production conditions were among the criteria reviewed, 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.

The housing PMI is based on five major survey areas: new orders with a coefficient of 30%, raw material inventory levels (10%), production (25%), supplier deliveries (15%) and employment (20%).

The new orders sub-index stood at 38.59 in the month ending Jan. 20, indicating an 11.47% growth compared with the previous month (34.62).

The supplier deliveries sub-index, which measures how fast deliveries are made, increased from 43.96 in the month ending Dec. 21 to 47.83 in the month ending Jan. 20, indicating an 8.8% growth.

The raw materials (construction materials) inventory levels sub-index increased 0.41% from 36.26 in the month ending Dec. 21 to 36.41 in the month ending Jan. 20.

The employment sub-index improved 0.22% from 41.76 in the ninth Iranian month to 41.85 in the 10th month.

To calculate housing PMI, seven secondary criteria were also surveyed by ICC, including raw materials purchase prices, which stood at 84.62 in the month ending Dec. 21, decreased 13.3% but stood at 73.37 in the month ending Jan. 20.

Warehouse inventory level dropped 0.45% to 53.26 in the 10th Iranian month from 53.5 in the ninth fiscal month.

The exports sub-index rose to 47.28 in the month ending Jan. 20 from 43.96 in the month ending Dec. 21, registering a 7.55% growth.

Prices of products or services decreased by 0.74% to stand at 55.98 in the month ending Jan. 20 from 56.4 in the month ending Dec. 21, 2019.

Fuel consumption declined 3.08% from 54.95 in the month ending Dec. 21 to 53.26.

Sales level slid 1.1% in the 10th Iranian month from 41.21 in the ninth fiscal month to 40.76.

And, the performance expectations for the following month sub-index settled at 54.89 in the month ending Jan. 20 from 44.5 in the month ending Dec. 21 to register a 23.35% growth.

Uptrend in Tehran Market

The improvement in the housing sector's PMI is also reflected in the latest report released by the Central Bank of Iran, which suggests a market uptrend.

According to CBI, 10,687 homes were sold in the capital city during the 10th month of the current fiscal year (Dec. 22, 2019-Jan. 20) to register a 12.1% rise compared to the month before.

The number of home sales in the capital city rose by 59% compared to last year's similar month.

The average price of each square meter of a residential unit in Tehran stood at 138.09 million rials ($1,022) during the month under review, indicating a 2.1% increase compared with the preceding month.

Compared to the same month of last year, the average prices showed a surge of 40.9%, the Central Bank of Iran reported.

Newly-built residential units—those up to five years old—grabbed the highest proportion of the total number of deals with 41.8%, down by 1.6 percentage points compared with the same month of last year.

That lost share was added to homes with a lifespan of six to 10 years and those between 16 and 20 years. Homes that were six to 10 years old and those between 16 and 20 years respectively accounted for 19.4% and 16.9% of the total deals.

The share of home deals with a lifespan of 11 to 15 years decreased from 13.8% of the total deals in last year’s same month to 12.6% this year. Homes above 20 years posted a share of 9.3% of total deals, compared with 11.2% of the same month of last year.

The distribution of the dealt properties shows that among Tehran's 22 districts, District 5 grabbed the highest share of total deals at 16.3%. It was followed by districts 2 and 4 with a respective share of 9.4% and 9.2%.

All-in-all, 10 districts (five, two, four, 10, 14, eight, seven, 15, three and 11) grabbed the lion's share of the deals at 73.8% with the remaining 12 districts holding a 26.2% share.

Among Tehran's 22 districts, District 1 registered the highest average home price of 301.6 million rials ($2,234) per square meter. District 18 offered the capital city's cheapest homes with average per-square meter price standing at 65.3 million rials ($484). These figures showed a respective increase of 30.5% and 55.3% YOY.

Residential units with an average price range of 90 million rials ($666) to 105 million rials ($777) per square meter were the highest in demand as they grabbed an 11.6% share of all deals.

They were followed by units priced at 105 million rials to 120 million rials ($888) per square meters and those priced at 75 million rials ($555) to 90 million rials per square meter with a share of 10.8% and 10.3%, respectively.

From the total number of deals, 57.9% belonged to homes cheaper than the average per-square meter price of the city (i.e. 138.09 million rials or $1,022).

Residential units with floor areas of 60-70 square meters registered the highest number of deals with a 15.2% share of total deals.

Units with an area of 50-60 square meters and 70-80 square meters came next with a respective share of 14.5% and 12.6%. All-in-all, units with an area of less than 80 square meters had a 55.9% share of total deals.

CBI data further show Tehran homes worth between 3 billion rials ($22,222) and 4.5 billion rials ($33,333) were highest in demand with a 13% share of total deals.

Homes with price tags of between 4.5 billion rials and 6 billion rials ($44,444) and those between 6 billion and 7.5 billion ($55,555) came next with a respective share of 12.1% and 10.8% of total deals.

Collectively, homes valued at less than 9 billion rials ($66,666) had a 48.5% share of total home deals.