Turkish house sales have been rising for three months in a row, breaking a 22-monht record in October with 170K units changing hands, as the share of mortgage financed houses continued to rise from 8% to 13%. The sudden surge in housing demand brought the questions to the fore whether a new price bubble was forming. This is probably not the case. Buyers ate taking advantage of an unprecedented decline in real (inflation adjusted) prices.
The sahibinden.com Rental and Sale Housing Market Outlook report, prepared in cooperation with sahibinden.com house sale e-site and Bahçeşehir University Economic and Social Research Center (BETAM), reported that October, that housing prices across Türkiye and in three metropolitan cities increased slower than inflation; i.e. decreased in real terms.
The annual rate of change in real prices was -17.9 percent across the country, -18.5 percent in Istanbul, -16.1 percent in Ankara and -14.8 percent in Izmir in September. When nominal prices are examined, the increase continued compared to the previous year. The annual rate of increase in current prices was a meagre by 0.3 points across the country compared to September, reaching 21.9 percent annually. For comparison, October CPI was 2.88% MoM and 48.58% YoY.
Economist Bader Arslan: Is a new bubble inflating in the housing market?
Writing for the prestigious economics website, economist Mr Bader Arslan commented on the outlook for house prices:
More or less all of the indicators confirm that a movement has begun in the housing market. This raises the question in some minds: “Will we experience a jump in housing prices that can be called housing-mania, as in 2022?”.
I think this possibility is low. The most important reason for this is that the environment that caused a jump in housing prices in those days does not exist today. As you may remember, as the policy rate was reduced from 19 percent, inflation increased from 16 percent to 80 percent, and in this process. This meant keeping TL deposits meant constantly losing purchasing power to inflation. As a result, citizens turned to cars, housing, gold and foreign currency to protect the real value of their savings. Buying a house and a car went beyond meeting a need and turned into an investment tool.
This is not the case today. Demand for TL continues to increase, the share of TL in total deposits, which dropped to 30 percent in 2022, has risen to over 50 percent again. If there is no change in the backbone of our current economic policies, we should not expect a sensational increase in housing prices.
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