The general price index of construction materials for residential units in Tehran jumped by an annual rate of close to 50% during the second quarter of the current fiscal year that ended on Sept. 22, contributing to rising housing costs in the capital city.
According to the latest report of the Statistical Center of Iran published on its official website, the general price index of residential construction materials reached 315.4 during the second quarter of the current year.
That figure indicated an increase of 25.7% when compared with the first quarter of the current year (ended June 21) when the index stood at 250.8 and rose by 49.1% compared with the second quarter of the previous year when the index registered 211.6.
During the year ending this year's Q2, the index grew by 26.7% while in the year ending Q1, the index had grown by 17.4%.
The category of "ironware, doors, windows and fences profile" experienced the highest volume of price growth during this year's Q2 when the index reached 370.5. The category witnessed massive price hikes of 45% and 94.9% when compared to the current year's Q1 and last year's Q2 respectively.
The category was also mostly responsible for the growth in the overall price index since it boasts an importance factor of 18.42%. Its price index grew by a hefty 62.6% during the 12 months ending Q2.
Rising construction costs, coupled with a dwindling purchasing power of the general public, have meant that the housing sector is once more facing a nationwide recession after enjoying about three quarters of boom.
During the current year's Q2, the category of "lumber" came second in terms of price growth since its index reached 407.3, which was higher by 64.3% and 108.1% compared to the previous quarter and the same quarter of the year before.
During the 12 months ending Q2, the growth rate of the category's price index was equal to 43.2%. Its importance factor was 7.79%.
The category of "services" was the third largest group responsible for the growth in the overall residential construction material price index during the current fiscal year's summer. Its growth rates were relatively small in terms of numbers, but the increase was significant, as the group has an importance factor of 25.57%.
During this year's Q2, the group's index was registered at 274.8 which was higher by 4% and 20% when compared to this year's Q1 and last year's Q2. In the 12 months ending Q2, the group experienced a growth of 13.8% in its price index.
Six-Year Overview
A look at the SCI data for the past six years shows that the residential construction material price index increased in five of those years.
During the fiscal 2011-12, the index grew slightly but continuously in each quarter.
SCI uses that year as the base year for its calculations, and therefore considers the index to stand at 100 during that year.
In the next year, the index stood at 116.9 in Q2 and grew to 131.6, 145.4 and 152.9 respectively by the end of the year, indicating an annual 36.7% rise in the index that averaged 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 registered 178.1 during Q1 and it 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 show 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 continuously rise 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 showcase 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 show a yearly rise of 12.3%.
SCI uses the Iranian year of 1390 (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.
What's Next?
The numbers for the first two quarters of the current fiscal year begin to show an alarming pattern.
During the first quarter of the current year, the index stood at 250.8 and jumped to 315.4 in the second quarter. If the current trend continues, the year will have by far the largest jump in the residential construction material price index of the past six years.
The considerable increase in the prices of residential construction materials are due to surging nationwide prices of almost all commodities witnessed during the past few months, following a May decision by US President Donald Trump to withdraw from Iran's nuclear deal with world powers and unilaterally reimpose sanctions against the Islamic Republic.
Rising construction costs, coupled with a dwindling purchasing power of the general public, have meant that the housing sector is once more facing a nationwide recession after enjoying about three quarters of boom.
The latest report of the Central Bank of Iran on Tehran's housing market published on Sunday showed that prices maintained their sharp rising trajectory for the fifth month in a row during the seventh month of the current year that ended on Oct. 22 while the number of home deals fell.
