Turkey’s home sales growth falls to 2% y/y in May

Turkey’s home sales growth falls to 2% y/y in May
By bne IntelliNews June 23, 2017

Home sales in Turkey rose by 2% y/y to 116,558 units in May, following the 8% y/y growth registered in Aprildata from statistics office TUIK showed on June 23.

Six straight months of home sales growth was recorded in Turkey from August last year to January thanks to government efforts aimed at boosting construction demand to support the slowing economy. And it seems the government’s attempts to boost construction demand have also supported home sales growth during the first five months of 2017, though in February there was a slight break in the trend with growth edging down 0.2% y/y.

During the January-May period, home sales grew 6% y/y to 556,784 units. Property sales to foreigners were down 2% y/y to 7,669 units.

In January, Turkish President Recep Tayyip Erdogan offered the chance of Turkish citizenship to certain foreign real estate investors through an executive order. The government has high hopes that $1.9bn worth of real estate sales to foreigners can be achieved this year. However, the cloudy economic and political outlook in Turkey is suppressing foreign investors’ demand for real estate.

Ministers are also trying to stimulate domestic demand for real estate with a number of measures. Government officials, including Erdogan, have, for instance, been calling on Turkey's banks to cut interest rates on home loans, while VAT levied on home sales has been reduced.

A record high 1.34mn residential units were sold in Turkey last year, a 4% y/y increase. A total of 1.29mn units were sold in the country in 2015, 11% up on the 2014 figure.

Home prices in Turkey rose 13.34% y/y in March, meaning there was almost no change from February's 13.33% y/y hike. The annual home price growth of 12.26% recorded in December was the slowest since April 2013’s 12.09%, when CPI inflation stood at 6.13%. Growth moved into an escalating phase across the first three months of 2017, but the escalation in the CPI meant inflation outpaced home prices during the first quarter.

Turkey’s annual inflation rate slightly declined to 11.72% in May after hitting 11.87% in April, the highest level recorded since October 2008.

End-2017 Turkish inflation expectations edged up from 9.53% in May to 9.55% in JuneIn April, Turkey’s central bank revised up its end-year inflation expectation for 2017 to 8.5% from its previous forecast of 8%.

The World Bank is forecasting a quickening of annual inflation to 9% at the end of 2017 from last year’s 8.5% while the OECD raised its 2017 CPI inflation forecast for Turkey to 10.4% in its June Economic Outlook forecast from its previous forecast of 7.7% given last November.

Turkey's construction sector calendar-adjusted turnover index rose 5.3% y/y in Q1 after growing 11.4% y/y in the last quarter of 2017.

The number of building construction permits granted in Turkey declined by 15% y/y to 28,711 in Q1. Building permits data for Q1 shows that the construction industry’s appetite for launching new projects has not been fully restored as yet despite all the stimulation measures undertaken by the government.

The construction sector’s output increased by 3.7% y/y in Q1, the same pace recorded in the fourth quarter, according to the latest GDP data from TUIK. The growth registered in the last two quarters was the lowest growth rate registered since Q3 2015. The construction sector was once seen as one of the reliable drivers behind robust economic growth in Turkey.

Data

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