Homes sales in Turkey rose by 22% y/y to 119,413 units in June following the 3% y/y growth registered in May, national statistics office TUIK reported on July 19.
Mortgage sales jumped by 35% y/y to 47,648 contracts, marking the first annual increase recorded this year.
The government tried to stimulate home sales prior to the June 24 snap elections. A total of 41 Turkish property developers were set to cut home prices by 20% across their 150 projects by June 15, three sector associations—Istanbul Construction Companies Association (INDER), Real Estate Investment Companies Association (GYODER) and Housing Developers Association (KONUTDER)—announced on May 15 at a joint press conference.
Additionally, Turkish state-owned lenders Ziraat and Halkbank announced that they were cutting monthly mortgage rates to 0.98%. Their move came after the chief executives of the banks met with Turkish President Recep Tayyip Erdogan on May 9. Throughout his decade and a half at the top of politics, Erdogan has always tried to drive growth through big real estate and mega-infrastructure investments.
Local media reports suggest that the mortgage rates rose back to 2% in July.
Erdogan shows no let-up in pushing for lower interest rates despite Turkey's economy entering territory where analysts suspect it is seriously overheating. However, sticky and rising double-digit inflation and a lack of cash at local lenders following last year’s credit boom have prevented the central bank and the banking industry from responding to Erdogan's calls for cheaper money.
Also in May, the government cut the VAT charged on certain properties from 18% to 8% and reduced title deed fees from 4% to 3%.
Consequently, home sales declined by 1% y/y to 646,032 units in H1 while mortgage sales fell by 18% y/y to 201,805 contracts.
Home sales to foreigners rose by 23% y/y to 11,944 units in the first half.
There are a total of 1.5mn-2mn unsold homes in Turkey, according to sector representatives.
Annual home price growth in Turkey edged up from 10.12% in April to 10.59% in May, data from the central bank showed on July 17. The posted growth rate fell below the annual CPI inflation rate last September and stayed there in the subsequent recorded ninth months.
Turkey’s annual consumer price inflation jumped from 12.15% in May to 15.39% in June, taking the rate up to the highest level recorded since 2003, the Turkish Statistical Institute (TUIK) announced on July 3.
Expectations for Turkey's end-2018 inflation rate rose to 12.28% in June from 11.07% in May, the central bank’s regular survey of businesses and analysts showed on June 11.
The seasonally-adjusted construction confidence index decreased by 2.4% m/m to 75.3 in June. The index rose to 87 in January and then posted declines in the following five months in a row.
Reuters in April reported that payment problems and a slowdown in new projects had beset the Turkish construction firms that have driven the country’s stellar economic growth for years.
“Exposures to the construction and energy sectors and high borrower concentrations are also significant sources of risks at many banks,” Fitch Ratings said on June 1 when it placed 25 Turkish banks and their subsidiaries’ Long-Term Foreign-Currency (FC) Issuer Default Ratings (IDRs) and Viability Ratings (VRs) on Rating Watch Negative (RWN).
Homes sales 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.
Mortgage sales rose by 5% y/y to 473,099 contracts in 2017.
Property sales to foreigners increased 22% y/y to 22,234 units last year.