Construction Material Prices Exceed 47 Percent in Tehran

EghtesadOnline: The construction material price index for Iran's capital city, Tehran, stood at 313.4 in the last Iranian year (March 2018-19) to register a 47.8% increase compared with the year before.

News ID: ۷۸۴۶۶۲

14 May 2019

According to the Statistical Center of Iran’s latest report published on its website, the index stood at 212.1 in the year ending March 20, 2018, indicating a 12.3% increase compared with the previous year.

The index posted an increase in all four quarters of last year, with the sharpest quarter-on-quarter growth registered in summer (the second quarter that ended on Sept. 22, 2018) at 25.7%.

The index for summer had an increase of 49.1% compared with the second quarter of the previous year, according to Financial Tribune.

The category of “bituminous waterproofing, bitumen and asphalt” with a price growth of 124.8% compared with the year before gave the biggest boost to the overall index last year. The index for this category stood at 463.3.

The second biggest boost to the index was given by the price rise of the “lumber” category with 99%. The index for this category hit 401.3 last year.

The “ironware, rebar, doors, windows and fences profile” category price index picked up 81% from the year before to weigh the third biggest pressure on the main index. The index for this category hit 337.7 last year.

Sale on Credit

Amid the rising prices of construction materials, the Ministry of Roads and Urban Development said it is working on the final stage of a project on selling construction materials to major housing builders on credit.

According to Roads Minister Mohammad Eslami, the plan will be carried out in cooperation with Bank Maskan, the state-run agent bank of Iran’s housing sector, and will be implemented as soon as it is finalized.

The project aims at decreasing 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.

The ministry has yet to set the credit ceiling but it will be adjusted based on the floor area of homes, Hibna quoted him as saying.

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 uses that year as the base year for its calculations and considers the index to stand at 100 during that year.

Next year, the index stood at 116.9 in Q2 and respectively grew to 131.6, 145.4 and 152.9 by the end of the year, indicating an annual 36.7% 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 following 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 showcase 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 mark a 6.6% hike.

During 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 register a yearly rise of 12.3%.

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 the fiscal 2016-17.