EghtesadOnline: The per square meter price of homes in Iran are 500% more than their construction costs, a deputy minister of roads and urban development said.
Noting that exorbitant home prices are beginning to stabilize in recent months, Mahmoud Mahmoudzadeh added that the only reason behind the wide gap between the construction costs and home prices is that housing remains an investment vehicle, IRIB News reported.
According to Ahmad Khorram, the head of Construction Engineering Organization, each year, 100 million square meters of buildings are constructed in Iran’s urban and rural areas.
“The annual turnover of real-estate development is 4,000 billion rials [$16 million]. The per square meter cost averages 50 million rials [$200] in Iran, with 60-65 million rials [$240-260] in cities and 30-35 million rials [$120-140] in villages,” he said.
“Engineering services account for 5-8% of construction costs in the world whereas in Iran they barely exceed 1%.”
A total of 3,515 homes were sold in the capital during the 10th month of the current fiscal year (Dec 21, 2020-Jan. 19), registering a 37.6% increase compared with the preceding month but a 67.1% decline compared with the same month of last year.
Data published by the Central Bank of Iran on its website also indicate that the average price of each square meter of a residential property in Tehran stood at 273.86 million rials ($1,095) during the month under review, showing an increase of 98.3% over last year’s same month as average prices were then registered at 138.09 million rials ($552).
Average per square meter home prices in the capital city increased by 1.8% compared to 269.05 million rials ($1,076) in the ninth month of the current year.
During the 10 months of the current Iranian year that started on March 20, the number of home deals finalized in Tehran totaled 74,113, which shows a 23.3% rise year-on-year.
In the same period, the average price of each square meter of a home in the capital stood at 227.72 million rials ($910), signaling a YOY surge of 76.8% compared with the similar period of last year.
SCI: Tehran Housing Inflation at 71%
The Consumer Price Index for the housing sector of the Iranian capital city in the 12-month period ending Jan. 19, which marks the end of the 10th Iranian month, increased by 71.8% compared with the corresponding period of last year, latest data released by the Statistical Center of Iran show.
SCI had put the average annual inflation rate for the preceding Iranian month, which ended on Dec. 20, 2020, at 68.2%.
The housing inflation for the month under review registered a year-on-year increase of 90.4% compared with the similar month of the previous Iranian year. The year-on-year inflation of the month ending Dec. 20 was 83%.
The housing CPI (using the Iranian month to April 19, 2016 as the base) stood at 638.3 during the period, indicating a 8.2% growth compared with the month before.
During the month ending Dec. 20, the housing CPI stood at 589.8, registering an 8.5% decline compared with the previous month.
The average goods and services CPI in the 12-month period ending Jan. 19 for Tehran Province, wherein lies the capital city, increased by 33.7% compared with the corresponding period of last year.
SCI had put Tehran’s average annual inflation rate for the preceding Iranian month, which ended on Dec. 20, at 32.4%.
The consumer inflation for the month under review registered an increase of 43% compared with the similar month of the previous Iranian year. The year-on-year inflation of the month ending Dec. 20 was 41.4%.
The overall CPI (using the Iranian year to March 2017 as the base year) of Tehran province stood at 287.9 last month, indicating a 2.4% rise compared with the month before. Month-on-month consumer inflation was 1.1% for the preceding month
SCI put urban and rural areas of Tehran Province 12-month inflation for the month under review at 33.8% and 32.8%, respectively.
CPI registered a year-on-year increase of 43.1% for urban areas and 41.8% for rural areas in the month ending Jan. 19.
The overall CPI reached 287.9 for urban households and 288.9 for rural households, indicating a month-on-month increase of 2.4% and 1.6% for urban and rural areas, respectively.
Tehran’s Q3 Construction Material Inflation at 59.6%
During the four-quarter period to Dec. 20, the end of the third quarter of the current Iranian year (Sept. 22-Dec. 20, 2020), the general price index of construction materials for residential properties in Tehran grew by 59.6% compared with the previous year's corresponding period.
The average annual inflation of construction material was 40.8% in Q2 (summer).
The index stood at 850.1 in Q3, according to the Statistical Center of Iran's latest report published on its website. Compared with the previous quarter, which ended on Sept. 21, 2020, it saw a 21.6% rise. In the second quarter, the construction material price index stood at 698.8 and registered a 30.3% quarter-on-quarter growth.
The index rose by 101.6% in Q3 (fall) compared with last year's corresponding quarter. In Q2, the year-on-year index growth was 71.4%.
When compared with the previous quarter, the category of “cement, concrete, gravel and sand” registered the highest growth among all categories of construction materials with a price growth of 48.2%. “Services” recorded the lowest index growth with 5.5% compared with the preceding quarter.
“Ironware, rebar, profile for doors, windows and fences” witnessed the highest year-on-year and annual price hike with 163.5% and 105.5%, respectively. “Services” registered the lowest year-on-year price growth of 40.3% and “glass” category posted the lowest average annual growth of 25.5%.
Building Permit Fees in Tehran Rise 30%
Building permit fees in Tehran increased by 30% as of June 21 compared with last year. The decision was approved by the Tehran City Council in the final month of last Iranian year (Feb. 20-March 19) as per Tehran Municipality’s 2020-21 budget but was not enforced until recently due to the coronavirus-related suspensions of housing projects.
Building permit fees depend on the floor area, scope of work and the type of building being constructed or altered. They form part of the overall costs incurred during the development of a built asset.
At present, construction costs in Tehran have increased to at least 45 million rials ($180) per square meters. The average building permit fees hovered around 5-7 million rials ($20-28) per square meter last year. With the 30% increase, permit fees will reach 6.5-10 million rials ($26-40) per square meter.
However, a report by the Persian economic daily Donya-e-Eqtesad says, such fees will exceed 20 million rials ($80) in some northern districts of the capital city, particularly for high-rise building projects.
In accordance with a memorandum of understanding recently signed between Iranian Municipalities Organization and Urban Regeneration Corporate Holding Company, affiliated to the Ministry of Roads and Urban Development, building permits in slum areas will be granted free of charge.
According to Deputy Roads Minister Mehdi Obouri, builders who intended to build residential properties in slum areas were previously entitled to a 50% discount in permit fees, but the current MoU offers 100% exemption in permit costs.
“Fifty percent exemption in architectural and engineering expenses has also been envisioned in an agreement signed between Iran Construction Engineering Organization and the Interior Ministry’s Development Department to encourage homeowners in slum areas to rebuild their homes,” Obouri was quoted as saying by Iran Online.
Before the 30% increase, permit costs accounted for 5 billion rials ($20,000) of the overall costs of developing a typical building in Tehran, i.e., a 4-5-story building comprising 8-10 residential units each with a floor area of 80 square meters, constructed on 300 square meters of land) in popular districts of Tehran.
Besides building permit fees, real-estate developers say the overall costs of construction are expected to increase on the back of strong growth in the prices of construction materials and land.
The costs of construction materials, they say, are now 50% higher compared with the first half of last fiscal year (March 21-Sept. 22, 2019). The average price of a square meter of land in the year ending March 2020 increased by more than 90% compared with the year before.
By June 20, land prices rose by 15% in some neighborhoods compared with March.