Has inflation disrupted the rental market? – Tejarat News

According to Tejarat News, but this time swelling Rents have outpaced general inflation and set a record for the fourth time.

According to the economic world, official statistics indicate that housing rental inflation in the country has surpassed the monthly general inflation for the fourth consecutive month.

Rent inflation overtook general inflation in the country earlier in the months of August, September and Mehr, so that in August, the monthly general inflation rate in the country was 2%, but rent inflation was 2.9%.

The gap between general inflation and rent increased slightly in the month of Shahrivar, so that despite the general inflation of 2.2 percent in this month compared to the previous month, the rent inflation in the country was recorded at 5.3 percent during the month of Shahrivar.

In October, the inflationary trend of the rental market progressed in such a way that the gap with the monthly general inflation rate intensified. The country’s monthly general inflation was 3 percent in October, while the rate of rent inflation was calculated at 1.6 percent in this month.

But according to the latest official data of the Iranian Statistics Center, this trend has continued in the middle of autumn. Moreover, the statistics for November 1401 indicate that the monthly general inflation rate in the past month was 1.2 percent, while the growth of rent in the country was 7.3 percent compared to October.

Why is housing rental inflation important?

Overtaking swelling Rent from general inflation is important because the review of statistics from previous years shows a different situation in different periods of the housing market.

For example, in November of last year, the monthly general inflation equal to 5.2% was announced, which was one percentage point higher than housing rent inflation. Also, before the jump in the rental cost (November 2018), the monthly general inflation was calculated at 1.6%, which was 0.3% higher than the monthly rent inflation in that month.

The comparison of general inflation and housing rent in the same month of 2016, i.e. the period before the jump in housing prices, also shows that at that time, the monthly general inflation was more than twice the growth of the rent price index in the whole country.

General inflation is one of the parameters that follows the two variables “general inflation” and “housing inflation” and is usually between these two rates; Although in Tehran, the index of total household expenses has increased 5 times and the price of housing has increased more than 8 times since 1996, but during the same period, the rent price changes in Tehran have been between these two values ​​(9.5 percent).

However, the trends over the last three years show that this is not the equation of rent inflation and its ratio with general inflation; Moreover, during the last three years, the significant increase in rent inflation has been a factor in the fluctuation of general inflation at high levels. In fact, rent inflation is present in a two-way game in the sense that, on the one hand, changes in the cost of renting are a function of general inflation, and on the other hand, the growth of the rent index itself has been the cause of the increase in general inflation in recent months.

Rent rates in the shadow of housing inflation and general inflation

Since 1999, when the rent rate in the country has soared, this index is affected by two main drivers, namely the rate of swelling It was general and housing inflation. But the analysis of the housing rental market trend shows that in the past two years when the housing market was relatively stable and housing inflation was not significant, the general inflation was very high due to the growth of other expenses. That’s why the landlords were looking at the changes in general inflation to determine the rent.

In fact, despite the rule of relative stability in the housing market from the beginning of 1400 onwards, landlords determined the growth rate of their property rent based on the general inflation situation. In this way, as much as the general inflation increased during the last two years, its stimulating effect on rent inflation was immediately evident. But this is only one side of the two-sided game of rents with general inflation. Another aspect of this game is the impact of rent inflation on general inflation.

Currently, the weight of housing in the household expenditure basket in the country has reached 30.7% with a slight increase. With the significant weight that rental costs have in the entire household budget, its high monthly growth has been one of the factors of increasing general inflation.

At present, the weight of food in the household basket is about 27%, and the rest of this basket is dedicated to goods. On the other hand, these figures show that the weight of housing in the household expenditure basket has increased, while the weight of food has decreased compared to the past.

In 1996, the weight of housing was 26% of household expenses in the country, which has now reached nearly 31%. Meanwhile, the weight of food has decreased from 28% to 27% and the weight of other goods in the basket of expenses has also decreased.

Experts had previously warned that housing poverty will cause households to reduce their daily calorie consumption in favor of meeting their irreplaceable need, i.e. housing, and now official statistics confirm this fact.

Two-way game of rental inflation

The official report of the Statistics Center on the growth of the household expenses index in the middle of autumn and the trend since August shows that the rent price index has been playing a two-way game for some time, affecting both the general inflation and being affected by this variable.

Ironically, the impact of rent on inflation has started in the same month that the housing trustee expected the mandated rent control policy to work. But right in the middle of the summer, a situation different from what was expected happened and the monthly rent inflation overtook the general inflation. In this way, the first message that can be taken from this incident is that not only did the mandatory policy have no effect on rent control, but the manipulation of the rental market equation with the Corona rent ceiling actually led to a decrease in supply and fueled rent inflation.

The second message that the housing trustee can receive from this event is that one way to control the rent at the moment is to control general inflation; Moreover, rent inflation itself has been a factor in the growth of general inflation in the last two years. Now, instead of focusing on the housing rental market, the government can improve the market conditions for the benefit of tenants by adopting policies that will restore stability to the economy and curb general inflation.

To read more, read the news that the annual inflation of the first decile has reached 50%/increase in the inflation gap of the deciles.