Iran Housing PMI Growth Prolongs for Second Consecutive Month

EghtesadOnline: The Purchasing Managers' Index of the hosing sector for the third month of the current fiscal year (May 21-June 20) settled at 64.36 from 60.55 in the preceding month (April 20-May 20), showing continued recovery in this sector.

News ID: ۷۵۰۴۱۷

08 July 2020

Iran Chamber of Cooperatives has measured the purchasing managers’ index for the country’s real-estate and construction sectors, under the Farsi acronym “Shamekh”, in the third month of the current Iranian year (ending June 20).

The new report shows overall PMI settled at 64.36 from 60.55 in the second Iranian month, indicating a 6.29% growth month-on-month, the Statistics and Economic Analysis Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture announced.

Notably, PMI stood at 18.75 in the first month of the current Iranian year March 19-April 19)—the lowest since PMI reports began in the fiscal month, Sept. 23-Oct. 22, 2019.

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 housing PMI is based on five major survey fields: "new orders", "raw material inventory", "production", "supplier deliveries" and "employment".

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

Coronavirus Impact

Coronavirus has stoked concerns about losing one’s savings and more people entered the housing market in the month ending May 20 to register an 809.9% rise in home deals compared with the preceding month.

“People are turning to the housing market in order to protect their savings in the face of rising inflation. No one sees housing as a short-term consumer commodity. Even real consumers view purchasing a home as a long-term investment,” says Mehdi Soltan-Mohammadi, a housing expert.

“In recent years, Iran’s population has continued to grow and the migration from villages to cities has increased tremendously. Policies need to be directed toward encouraging supply. However, interference in the markets, including the housing market, which has the self-regulation function, is not advisable.”

Echoing the same remarks, Ali Abdolalizadeh, former minister of housing, said there is no such thing as speculative practice in the housing market: 85% of homes built in Iran are traded by real consumers. A small fraction of people engages in house flipping [buying a house or property with the intention of selling it for a profit] and that’s only observable about luxurious homes.

“Price balance is more conspicuous in the housing market than in any other market. The rise in home prices over five-to-10-year periods went harmoniously along with inflation peaks,” he was quoted as saying by Persian-language daily Shahrvand.

A total of 11,310 homes were sold in the capital during the second month of the current fiscal year (April 20-May 20), registering an 809.9% rise compared with the preceding month. They saw a year-on-year decline of 6.7% compared with 12,128 deals in the corresponding month of last year.

The Central Bank of Iran's latest report shows a total of 10,778 homes were sold in the capital city during the third fiscal month (May 21-June 20), registering a 4.7% decline compared with the preceding month. They saw a year-on-year surge of 80.1% compared with 5,986 deals in the corresponding month of last year.

The average price of each square meter of a residential property in Tehran stood at 189.48 million rials ($881) during the month under review, showing an increase of 42.5% over last year’s same month, as average prices were registered at 132.99 million rials ($618).

Home prices in the capital city increased by 11.6% compared to 169.72 million rials ($789) in the second month of the current year.