Rising Construction Material Prices / New Alarm for Housing Market

A review by the Iran Chamber of Guilds of the construction materials market in September 2026 shows that the surge in exchange rates has spread to various construction sectors through raw materials, transportation, energy, and inflation expectations.

In September 1405, the building materials market faced a new wave of price increases; The wave that started from the currency market, reached the commodity exchange and the iron and steel free market and then showed itself in the price of cement, ready concrete, building blocks and electrical and mechanical facilities. The increase of 14-18% in the price of rebar in two weeks to the increase of 20-28% in the price of construction facilities in line with the exchange rate jump in September has increased the cost of construction, but in a market where the purchasing power and financing ability of builders is limited, will the increase in costs lead to the boom of housing transactions?

Analyzing the data of the analytical report on the effect of exchange rate fluctuations on the construction materials market, prepared by the Economic and Planning Vice-Chancellor of the Chamber of Trades of Iran, shows that the effect of the currency shock is not limited to import-related goods and has been transferred to various parts of the construction chain through the cost of raw materials, transportation, energy, and inflation expectations.

The more important issue is that the increase in the cost of construction inputs has happened in a market that is simultaneously facing the limitation of the purchasing power of households, the difficulty of financing projects and the reduction of the ability of builders to continue their activities. In such a situation, the increase in the price of materials can increase the cost of housing production, without increasing the effective demand for the purchase of residential units in the same proportion; A situation that increases the risk of worsening inflationary stagnation in the building market.

Shahrivar; When the currency shock reached the material market

According to the report of the Deputy Economic and Planning Department of the Chamber of Trades of Iran, the free market dollar rate was in the range of 202 to 206 thousand Tomans in the early days of September, and then, under the influence of geopolitical developments, regional tensions, the increase in oil prices and the intensification of economic uncertainties, it went up to the range of 230 thousand Tomans.

The timing of this jump with the final days of the suitable season for construction operations, especially concreting and execution of skeleton and stiffening, became more important. At this point, the builders need a continuous supply of rebar, beams, cement, concrete and construction equipment to advance the projects; Goods whose price change or disruption in supply of any of them can change the implementation plan and financial estimate of the project.

The first route of exchange shock transmission is raw material market and commodity exchange. With the change in calculation rates and the increase in inflation expectations, base prices and buyer competition for steel ingots, rebar, copper and petrochemicals were affected. In addition, the increase in the cost of inventory replacement also became a factor to change the behavior of sellers; In other words, some suppliers refused to sell at the previous rates or limited the sale to cash settlement and spot pricing due to the concern of the subsequent purchase price increase.

Therefore, the effect of the exchange rate in this market is not limited to the increase in the cost of imports. Even a domestically produced product may become more expensive due to raw material prices, equipment maintenance costs, transportation, or inflationary expectations. The result of this trend is increasing uncertainty in pricing and making financial planning more difficult for builders and contractors.

rebar, cement and facilities; Which sectors suffered the most?

The data of the September report show that the speed and intensity of the currency shock transfer were not the same in different groups of construction materials. In some items, the connection with the price of metals and raw materials revealed the effect of currency faster; In others, the cost of energy, packaging and transportation played a more prominent role.

In the steel market, rebar, iron beam and black sheets were among the first items that experienced an increase in price. According to the report of the Vice-Chancellor of Economy and Planning of the Chamber of Trades of Iran, the free market of iron and steel entered the situation of "price at the moment" between 11 and 18 September, and the price of all types of construction rebar increased by an average of 14 to 18 percent in two weeks. The increase in the precautionary demand for steel ingots in the commodity exchange also affected this trend. The importance of this increase becomes clearer when we know that steel is one of the main inputs for building skeleton. The change in the price of rebar and beam can quickly invalidate the initial estimate of the project cost; Especially for builders who have closed their contracts with a fixed price or their financial resources are provided based on pre-sale and gradual receipt of installments.

In the sector of cement and concrete products, the pattern of price increase was different. The report shows that although the factory door did not register an orderly increase in the price of clinker and cement, the growth in the cost of polypropylene bags, bunker transportation and maintenance of machinery affected the market price. As a result, the price of bulk and packet cement in distribution warehouses increased by 8 to 12 percent. The price of ready-mixed concrete also increased by 15% due to the increase in the rent of truck mixers and the current costs of stone crushers.

Light gas blocks also became more expensive by 10-12% due to the cost of aluminum powder, production energy and palletizing. In the case of bricks and pottery, the cost of road transportation was one of the main factors of price increase. But the most reported jump among the mentioned groups is related to electrical and mechanical facilities. The increase in the global price of copper and the rise in the dirham rate to more than 62 thousand tomans put pressure on the construction wire and cable market. Also, the price of five-layer pipes, brass fittings, pressure pumps and construction valves increased between 20 and 28 percent with the publication of new price lists. At the same time, the stoppage of sales by some wholesalers resulted in a temporary shortage of commonly used sizes of copper cable. These differences show that the price of rebar or cement cannot be considered to analyze the cost of construction. The cost of facilities, equipment and items used in the final stages of the building can also affect a significant part of the project budget and maintain the cost pressure even when the price of some basic inputs becomes calmer.

What do the official statistics say? The construction cost was high before the September shock

The price increase in September did not happen in secret. The official data of the Iranian Statistics Center about the input price index of residential buildings in the city of Tehran in the spring of 1405 shows that the total index reached 336.4 and compared to the previous season, it increased by 20.7% and compared to the same season of the previous year, it increased by 106.8%. The annual inflation of construction inputs has also been reported as 80% in this period. These figures have two important points. First, the construction cost was under considerable pressure before the currency jump in September. Second, the decrease in seasonal inflation from 36% in the winter of 1404 to 20.7% in the spring of 1405 did not mean a decrease in the price level; Rather, it only indicated a decrease in the rate of price increase.

In fact, the currency jump in September entered a market that was already facing an increase in the cost of inputs. Hence, even if currency volatility continues to decrease, the effect of the increase in recorded prices does not necessarily disappear immediately; Because inventory, purchase contracts, cost of replacing goods and new factory price lists are adjusted late.

From the high cost of materials to housing; Why is the price relationship not linear?

The increase in the price of construction materials can increase the cost of producing new units, but the transfer of this increase to the selling price of housing depends on the demand conditions, the status of transactions, the cost of land, wages, taxes, financing and the expectations of builders. When the cost of rebar, concrete, cable and valves increases, the builder needs more financial resources to complete the same project. If the selling price of the units is already fixed in the contract, the increase in cost will directly reduce his profit margin. If the project relies on advance sales in installments, the amount received may no longer cover the cost of purchasing materials. In both cases, the possibility of slowing down the physical progress of the project or delaying the start of construction increases.

The report of the Economic and Planning Vice-Chancellor of the Chamber of Trades of Iran also points to the same issue: some contractors who signed fixed-term contracts faced difficulties in continuing to work with the previous prices, and there were requests to modify or supplement the contract. Also, builders who relied on pre-sales in installments faced the gap between the installments and the cost of purchasing iron and facilities; A situation that can reduce the speed of project implementation.

However, it cannot be concluded that every increase in the price of materials will increase the selling price of housing in the same proportion. In a market where household purchasing power is limited, the manufacturer may not be able to pass on the entire cost increase to the buyer. In such a situation, part of the pressure appears in the form of reducing the profit margin, stopping the project, reducing the size of the new units or reducing the quality and changing the brand of the equipment. On the other hand, the decrease in housing purchasing power can limit the demand for new construction. In this way, the market faces a contradiction: the cost of housing production increases, but the purchasing power of the final product does not increase accordingly. This is the point where the high cost of materials, instead of necessarily leading to the prosperity of the building sector, can deepen the recession.

Stagnation in transactions is not an obstacle

One of the common mistakes in housing market analysis is equating the price increase with the market boom. The increase in the price of materials is not a sign of an increase in construction or the growth of transactions. In inflationary conditions, prices may rise due to increased costs of production and replacement of goods, while the number of new projects and the volume of transactions decrease.

The report of the Economic Deputy of the Chamber of Trades of Iran also emphasizes the same distinction: the currency shock of Shahrivar has increased the cost of buying inputs and in some cases accompanied the supply with more caution, but this increase in cost does not mean strengthening the real demand for housing. On the contrary, the increase in the cost of construction along with the difficulty of financing can reduce the power of manufacturers to supply new units.

The reports published on the construction market in August also mentioned the cessation of the monthly growth of the price of materials in some markets, along with the high level of costs compared to the previous year. This evidence shows that the materials market does not follow a uniform path at all times and for all items, and the cross-sectional stability of some prices should not be confused with the return of costs to past levels. From this point of view, the increase in housing prices may also be accompanied by a decrease in transactions. The seller keeps his bid high to compensate for the cost of construction or to maintain the value of the property; But the buyer is unable to accept that price due to limited income and difficulty in financing. The result is that the offered prices are far from the real purchasing power and the possibility of making a deal is reduced.

market outlook; The effect of currency can be delayed

Estimates show that even with the relative stability of the dollar, part of the effects of the price increase in Shahrivar will be visible in October and November through the publication of new lists of factories in items such as tiles, ceramics, stone and faucets. This assessment does not mean that the price increase of all these items is certain, but it emphasizes the existence of a time gap between the currency shock and its complete transfer to some parts of the market. On the other hand, if the exchange rate becomes more stable, inflationary expectations subside and the supply of materials continues in the commodity exchange and free market, there is a possibility of reducing the excitement of transactions and adjusting short-term fluctuations. However, the stability of the exchange rate alone is not enough for the market to return to normal; Because accumulated costs, energy constraints, transportation costs and liquidity problems can still affect production and distribution.

Therefore, the future path of the materials and housing market depends on a set of factors: economic and currency stability, production continuity, energy imbalance management, supply transparency, the possibility of financing projects and the return of effective demand. Without the simultaneous improvement of these variables, a temporary reduction in price inflation will not necessarily mean that the construction industry will come out of recession.

What the data of September shows is not just the increase in the price of some construction items; The problem is the transfer of economic uncertainty to the entire housing production chain. The high cost of materials becomes a wider crisis when the increase in production cost is accompanied by a decrease in purchasing power and a drop in investment in construction. In such a situation, neither the producer will have a stable and predictable market nor the consumer can bear the increase in costs without more pressure on the household budget. Overcoming these conditions requires policies that simultaneously aim at the stability of production, order in the supply chain, and the possibility of people's access to housing.