Annual home price growth in Turkey edged down further to 9.86% in August from 10.48% in July, placing it 804pp behind annual inflation, central bank data showed on October 16.

The figure compounds a worrying trend of lost value for home owners. The posted home price growth rate fell below the annual CPI inflation rate as far back as last September and it has now stayed there for 12 months in a row.

Home price growth was as low as 9.48% in March, the lowest level recorded since March 2011. The following two months saw increases but the growth rates still trailed inflation. The annual growth rates have declined for three months in a row since June.

Turkey’s annual consumer price inflation rate sprang from 17.9% in August to 24.52% in September, the Turkish Statistical Institute (TUIK) announced on October 3. The figure marked the highest level recorded since the end of 2003 and came in at a worse level than all expectations.

The construction confidence index decreased by a sharper 16.7% m/m to 66.4 in September following a 10.7% decline a month ago, according to the latest business surveys by TUIK.

TUIK said on September 24 in a separate release that annual growth in the construction cost index reached 27.01% in July. The index rose 16.18% in December and showed an escalating pace across the first seven months of 2018.

Homes sales in Turkey declined by 13% y/y to 105,154 units in August following the growth of 7% y/y registered in July, TUIK reported on September 17.

The government has been employing campaigns to stimulate home sales. Turkey has also lowered the requirements that foreigners must fulfil to acquire Turkish citizenship in a move to encourage investment, according to new regulations published in the government’s Official Gazette on September 19.

There are a total of 1.5mn-2mn unsold homes in Turkey, according to sector representatives.

In late August, the government backed the latest campaign in Turkey to stimulate home sales. Turkish property developers were targeting the sale of at least 25% of 100,000 discounted homes to be included in a campaign to run from August 29 to October 31, Turkish Minister of Environment and Urbanisation Murat Kurum said.

Kurum said on September 20 that more than 3,000 homes were sold under the scope of the campaign, according to BloombergHT.

Home sales edged down by 0.04% y/y to 769,910 units in January-July while mortgage sales fell by 18% y/y to 232,210 contracts, the latest data from TUIK shows.

The construction industry grew by 0.8% y/y in Q2, the lowest growth rate registered since Q1 2015, after growing 6.6% y/y in the first quarter, according to the latest GDP data. The sector grew by 9% y/y in 2017.

TUIK said on August 15 that the number of buildings granted construction permits fell by 28% y/y to 55,231 in H1 while the number of permitted dwelling units fell at a sharper 46% y/y rate to 349,985.

Homes sales in Turkey rose by 5% y/y to 1.41mn units in 2017, marking a new all-time high, following the 4% y/y gain in 2016 to 1.34mn units.

Expected further tightening in monetary and fiscal policies would weigh more on the construction industry which had already begun to show signs of a slowdown, the Contractors’ Association of Turkey (TMB) said on August 1 in its regular sectoral analysis report.

IMF estimates suggest that a significant share of domestic lending in FX has been to companies in the construction, real estate and energy sectors, whose incomes are presumably TRY-denominated as against their input costs which are FX-denominated.

Hakan Caglar, chairman of construction company Emay Insaat, told Bloomberg on August 1 that the company was in debt restructuring talks with lenders. Emay’s total debt was TRY1.2bn as of 2017 and the total value of its stock assets stood at TRY2bn, according to Caglar.

Ali Agaoglu, chairman of one of Turkey’s largest construction companies Agaoglu Group, on August 7 was quoted by Hurriyet Daily News as denying rumours that the company would file for bankruptcy. Agaoglu also said that the conglomerate was expecting $300mn from the sale of its two wind power plants.

Exposure to the construction and energy sectors and high borrower concentrations were also significant sources of risk at many Turkish banks, Fitch Ratings said on October 1 when it downgraded the Long-Term Foreign-Currency Issuer Default Ratings (LTFC IDRs) of 20 Turkish banks and their subsidiaries.