The housing market in Turkey continued to cool in September, extending a 20-month series of inflation-adjusted declines. The main reasons for this are tight monetary policy and an increase in the supply of municipal housing.
According to the Central Bank of the Republic of Turkey (CBRT), the Residential Property Price Index (RPPI), which tracks changes in housing prices across the country, adjusted for differences in quality, rose by 1.7% month-on-month in September to 195.7 points, Daily Sabah reported.
On an annual basis, housing prices increased by 32.2% in nominal terms. But after adjusting for inflation, they fell by 0.8%, the 20th consecutive month of real decline.
The last time house prices saw real annual growth was in January 2024, when they rose by 1.4%. A month later, they started to fall in real terms, falling by 5.1% in February. The sharpest annual decline was recorded in May 2024, when real prices fell by 14.9%.
Residential demand in Turkey remains strong, despite tight monetary policy that has kept borrowing costs high since mid-2023 to curb inflation.
According to data from the Turkish Statistical Institute (TurkStat), 150,657 homes were sold in September. This brought the total for the January-September period to 1.13 million units, an increase of 19.2% compared to the previous year. Mortgage sales last month increased by 34.4% to 21,266 units, while the total for the nine months increased by 76% to 162,493.
Turkey's inflation rate in September is higher than expected – 33.3%, the first annual increase since a peak of 75.4% in May last year.
According to surveys, this is expected to prompt the country's central bank to slow the pace of interest rate cuts when its policymakers meet on Thursday.
Professor Şener Şener of Istanbul University said that the decline in real house prices since February 2024 has been influenced by the government's medium-term economic program and the central bank's tight monetary policy.
The increase in housing supply, especially through state-backed projects, has also helped prices rise more slowly than inflation, Şener said.
The record sales volume in September signals strong underlying demand, according to the professor.
„This shows that the government's efforts have been met with a response from demand side and purchases have reached a certain level. In other words, the fact that demand is being satisfied to some extent has prevented prices from rising rapidly,” he noted.
Prices jumped sharply after the devastating earthquakes that hit southeastern Turkey in early 2023 and during the COVID-19 pandemic, as supply shrank and costs rose.
„Quick measures, especially the construction and delivery of a large number of new homes in the earthquake-hit provinces, helped contain the price bubble,“ he said.
„In large cities, the pressure on both rental and housing prices has eased relatively. At the same time, the process of disinflation and high interest rates on housing loans have limited potential demand.“
Sener warned that lower inflation could revive price pressures if mortgage rates start to fall.
„If housing financing costs decrease along with inflation, this downward trend could be reversed. To prevent another sharp rise, the private sector and entrepreneurs must continue to expand supply, along with the government's efforts, he said.
The central bank lowered its benchmark one-week repo rate by 250 and 300 basis points in September and July, respectively.
Economists expect it to cut by 100 basis points this week to 39.5%.
The CBRT forecasts inflation to fall to around 24% by the end of the year, with a forecast range of 25%-29%. The government's newly updated medium-term program expects it to slow to 28.5% this year.
According to real estate economist Ahmet Büyükduman, the double-digit real decline in house prices from last year has already slowed, with price changes approaching overall inflation.
“Given the signs of stronger housing demand, prices are expected to rise again slightly above inflation soon. For those buying homes for personal use, it is actually a favorable time,“ said Büyükduman.
Detailed statistics on average property prices in Bulgaria by city and neighborhood can be found at imot.bg