CBRT Rate Cut Fuels Housing Market Surge, Prices Set to Outpace Inflation

The Monetary Policy Committee of the Central Bank of the Republic of Turkey (CBRT) has lowered the policy rate by 250 basis points to 42.5%, aligning with market expectations. While the move is expected to reduce borrowing costs, experts warn of potential inflationary effects on the housing market.

Real Estate Prices Expected to Rise Above Inflation

Ahmet Arslan, Deputy General Manager of Denge Valuation, stated that the interest rate cut would make housing loans more affordable, increasing demand and housing sales. However, he cautioned that this surge in demand—coupled with supply shortages and rising construction costs—could push real estate prices above the inflation rate.

"The lack of housing supply and increasing construction costs will drive prices higher. Housing prices, which have been suppressed under the economic program, are now expected to rise beyond inflation, in line with increasing purchasing power."

Impact on Consumers: Mortgage Payments to Decrease

The interest rate cut translates into lower monthly mortgage payments, making housing loans more attractive:

• Before the rate cut:
  • A 1 million TL housing loan with a 120-month term had a monthly payment of 29,500 TL, with a total repayment of 3.54 million TL at an annual interest rate of 38.4%.
• After the rate cut:
  • With a 2.5 percentage point reduction in annual interest rates to 35.9%, the monthly payment drops to 27,156 TL, with a total repayment of 3.26 million TL.

Potential Market Consequences

While lower borrowing costs make homeownership more accessible, the increased demand may widen the affordability gap as prices rise. Experts suggest that without new housing supply, the market could experience excessive price inflation, offsetting the benefits of lower interest rates.

The CBRT’s monetary easing strategy will likely continue to shape housing affordability and inflation trends in the coming months.

Source: Paraanaliz.com

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