Iran Chamber of Cooperatives has measured the purchasing managers’ index (PMI) for the country’s real-estate and construction sectors, under the Farsi acronym “Shamekh”, for the 11th month of the current Iranian year ending Feb. 19.
The new report shows PMI increased to 51.76 in the 11th Iranian month (Jan. 21-Feb. 19) from 42.93 in the 10th Iranian month (Dec. 22, 2019-Jan. 20), indicating a 20.6% improvement.
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 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.
Housing PMI Fields
The housing PMI is based on five major survey fields: new orders, raw material inventory levels, production, supplier deliveries and employment.
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. It 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 46.47 in the month ending Feb. 19, indicating a 20.4% growth compared with the previous month (38.59).
The "supplier deliveries" sub-index, which measures how fast deliveries are made, increased from 47.83 in the month ending Jan. 20 to 49.41 in the month ending Feb. 19, indicating a 3.3% growth.
The "raw materials (construction materials) inventory levels" sub-index increased 19.6% from 36.41 in the month ending Jan. 20 to 43.53 in the month ending Feb. 19.
The "employment" sub-index improved 9.6% from 41.85 in the 10th Iranian month to 45.88 in the 11th month.
To calculate housing PMI, seven secondary criteria were also surveyed by ICC, including "raw materials purchase prices", which stood at 73.37 in the month ending Jan. 20. The sub-index improved 5% to stand at 77.06 in the month ending Feb. 19.
"Warehouse inventory level" dropped 5% to 50.59 in the 11th Iranian month from 53.26 in the 10th fiscal month.
The "exports" sub-index rose to 48.24 in the month ending Feb. 19 from 47.28 in the month ending Jan. 20, registering a 2% growth.
"Prices of products or services" increased 16.6% to stand at 65.29 in the month ending Feb. 19 from 55.98 in the month ending Jan. 20.
"Fuel consumption" declined 0.6% from 53.26 in the month ending Jan. 20 to 52.94.
"Sales" improved 22.7% in the 11th Iranian month from 40.76 in the 10th fiscal month to 50 in the 11th month.
And, the "performance expectations for the following month" sub-index settled at 39.41 in the month ending Feb. 19 from 54.89 in the month ending Jan. 20 to register a 28.2% decline.
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 an uptrend in Tehran's real-estate market.
Latest data released by the Central Bank of Iran show Tehran's housing market continues to pick up, leaving behind a long spell of inflationary recession.
The market has been energized over the past several months, thanks to a rise in home deals.
Nonetheless, prices continue to grow, albeit with a slowdown compared to a few months ago, in line with the overall inflation rate in the country, which now stands at 37%.
The inflation rate has been on a downward trend since past few months.
Mehdi Soltan-Mohammadi, a housing expert, told Tehran Chamber of Commerce, Industries, Mines and Agriculture in an interview that home prices have increased significantly over the past two years.
The gap between housing costs, either rents or property values, and households’ purchasing power has widened and that has led to an all-time low in home deals. However, the breakneck growth in home prices has decelerated since the fourth Iranian month (June 22-July 22, 2019). Thus far, the housing market is in a state of equilibrium and prices are not different from what they were then.
"Many customers who were left out of the market decided to make purchases and home owners who were waiting for further price hikes came to realize that they won’t reap more profits in the future and decided to put their properties for sale. This has paved the way for market liquidity in mid- and downtown areas of Tehran," he said.
The CBI report shows a total of 13,264 homes were sold in Tehran during the 11th month of the current fiscal year (Jan. 21-Feb. 19) to register a 24.1% rise compared to the month before.
The number of home sales in the capital city rose by 42% compared to last year's similar month.
The average price of each square meter of a residential unit in Tehran stood at 143.97 million rials ($934) during the month under review, indicating a 4.3% increase compared with the preceding month.
As compared to the same month of last year, the average prices surged by 44.4%.
Newly-built residential units—those up to five years old—grabbed the highest proportion of deals with 43.2%, down by 1.1 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 accounted for 18.2% and 16.3% of total deals respectively.
The share of home deals between 11 and 15 years decreased from 14.5% of total deals in last year’s same month to 12.6% this year. Homes that were 20 years old posted a share of 9.6% of total deals, compared with 9.7% in the same month of last year.
Tehran's 22 Districts
The distribution of dealt properties shows that among Tehran's 22 districts, District 5 grabbed the highest share of total deals at 17.1%. It was followed by districts 2 and 4 with a respective share of 9.7% and 9.2%.
All-in-all, 10 districts (five, two, four, ten, seven, eight, fourteen, fifteen, eleven and one) grabbed the lion's share of deals at 74.6% with the remaining 12 districts holding a 25.4% share.
Among Tehran's 22 districts, District 1 registered the highest average home prices at 285 million rials ($1,850) per square meter. District 18 offered the capital city's cheapest homes with average per-square meter price standing at 71.6 million rials ($464). Aforesaid numbers show a respective increase of 30.7% and 58% YOY.
Residential units with an average price range of 90 million rials ($584) to 105 million rials ($673) per square meter were the highest in demand, as they grabbed a 10.5% share of all deals.
They were followed by units priced at 105 million rials to 120 million rials ($779) per square meters and those priced at 75 million rials ($487) to 90 million rials per square meter with a share of 10.2% and 9.7%, respectively.
From the total number of deals, 56.4% belonged to homes cheaper than the average per-square meter price of the city (i.e. 143.97 million rials or $934).
Residential units with a floor area of 50-60 square meters registered the highest number of deals with a 14.5% share of total deals.
Units with an area of 60-70 square meters and 70-80 square meters came next with a respective share of 14% and 12.1%, respectively. All-in-all, units with an area of less than 80 square meters had a 53.4% share of total deals.
CBI data further show that Tehran’s homes worth between 4.5 billion rials ($29,220) and 6 billion rials ($38,961) were highest in demand with an 11.7% share of total deals.
Homes with price tags of between 3 billion rials ($19,480) and 4.5 billion rials and those between 6 billion and 7.5 billion ($48,701) came next with a respective share of 11.4% and 9.9% of total deals. Collectively, homes valued at less than 10.5 billion rials ($68,181) had a 52% share of total home deals.
11-Month Perspective
During the 11-month period to Feb. 19, the number of home deals in Tehran totaled 73,359, showing a 35.6% decline on a year-on-year basis.
In the same period, the average price of each square meter of a home in the capital stood at 130.18 million rials ($834), signaling a year-on-year surge of 63.5% compared with the 11-month period of last year.
Tenancy in Urban Areas
The central regulator also reports no changes in tenancy prices in the capital and across the country.
According to CBI, the price of rented residential units in Tehran and across all urban areas in Iran increased by 29.4% and 31.5% respectively during the 11th month of the current year when compared with the similar month of last year.
