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 has stayed there in the subsequent recorded ninth months. 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 rate still trailed inflation.

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.

The government tried to stimulate home sales prior to the June 24 snap elections. There are a total of 1.5mn-2mn unsold homes in Turkey, according to sector representatives.

Home sales in Turkey declined by 5% y/y to 526,619 units in January-May while mortgage sales fell by 27% y/y to 154,157 contracts. 

Reuters reported in April that payment problems and a slowdown in new projects were besetting Turkey’s construction firms, which have very much 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).

The construction industry grew by 6.9% in Q1, a higher rate than the 5.8% seen in Q4 2017, according to the latest GDP data. Construction contributed 0.7pp to last year’s 7.4% GDP growth.

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.