Home sales in Turkey contract 13% in August, mortgage sales sink 67%

Home sales in Turkey contract 13% in August, mortgage sales sink 67%
By bne IntelliNews September 19, 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 Julynational statistics office TUIK reported on September 17.

August’s mortgage sales sank by 67% y/y to 12,743 units, compared to the 21% y/y fall seen in the previous month. The sole annual rise recorded for mortgage sales occurred in June, for which a rise of 35% y/y was posted.

For January-August, home sales declined by 2% y/y to 875,064 units, with mortgage sales down 24% y/y to 244,953 contracts. 

Home sales to foreigners rose by 43% y/y to 18,540 units in the first eight months.

Turkey has 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. To gain citizenship, a foreigner need now only make a fixed capital investment in the country of a minimum $500,000 compared to the previous threshold of $2mn. Foreigners who have purchased real estate in Turkey worth a minimum of $250,000, instead of the previous minimum level of $1mn, can also now avail themselves of Turkish citizenship.

Pre-election stimulus
The government tried to stimulate home sales prior to the June 24 snap elections. President Recep Tayyip Erdogan, who was re-elected in the poll, has, meanwhile, shown no let-up in maintaining his unorthodox line that the country needs lower interest rates despite Turkey's currency meltdown and rocketing inflation. He did, however, theatrically bow to the central bank’s apparent independence last week when the rate-setters brought in a major rate hike. In late August, the government backed the latest campaign in Turkey to stimulate home sales.

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

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.

Home price growth way behind inflation
Annual home price growth in Turkey very slightly edged down from a revised 10.5% in June to 10.48% in July, central bank data showed on September 18.

In a worrying trend for home owners, the posted home price growth rate fell below the annual CPI inflation rate as far back as last September and has since stayed there.

Turkish inflation leapt again in August, soaring to a 15-year high of 17.9% y/y from July’s 15.85% y/y, TUIK announced on September 3. Given Turkey's ongoing currency crisis, markets see it passing 20% in months ahead.

The construction confidence index decreased by as much as 10.7% m/m to 68.8 in August, according to the latest business surveys by TUIK.

Expected further tightening in monetary and fiscal policies would weigh more on the construction industry which has 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.

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.

Home 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.