Exaggerated housing prices, a declining lira, and people wondering whether houses in Turkey can be used as an investment tool are all causing the sector to take stock this summer.
In real terms, housing prices have decreased in foreign currency terms and could fall further with the ailing lira. While house prices have been above the real market figures, many are now considering whether a house is an ideal investment tool.
While houses may continue to hold high prices in TL terms, at least house purchase rates are falling, and this decline could accelerate. It signals that the waiting period for sellers to sell their homes at a higher price could be over.
In June, home sales across Türkiye plunged 44.4% from a year ago to 83,636. New home sales declined 42%, while mortgaged sales dropped more than 45%.
Recently, banks have not been giving housing loans. This situation has made it more difficult for housing purchases. Dünya Newspaper’s economist Alaattin Aktaş also discussed this situation in his column on July 19. Aktaş wrote, “When we go into a bit of detail, it draws attention that the alarm bells for the sector are ringing quite loudly.
“For example, the rate of decrease in the purchase of mortgaged housing (housing by taking a loan from the bank) in June is 67 per cent in June and 29 per cent in six months. That is, no one uses or can use housing loans. According to the Central Bank, a 100-square-meter residence in Türkiye averages 2.3 million liras. Who can buy a house at this price without using a loan, without using a loan with favourable conditions or without saving…”
Aktaş added: “In a country where inflation is expected to increase gradually, the increase in housing prices, which will remain below the general inflation rate, will, of course, mean a decline in real terms. This is what is likely to happen.
“But it is an indisputable fact there is a very significant stagnation in the housing market. The fact the house was seen as an investment tool for a long time was also effective in this, as well as the high house prices. Now, however, that cutback in financial investment instruments, that is, the period of suppressing foreign currency and interest rates, is somewhat over.
“The attractiveness of buying and renting houses has also decreased considerably with the 25 per cent ceiling applied to the rent increase. All of this combined dragged down housing demand.”
Average home prices now at 2.54 million TL
The average home-sale price in Türkiye climbed to 2.54 million Turkish Liras ($96,359) in June, according to data by Endeksa, which collects data on the real estate market.
Home prices climbed by 110% year-on-year to 19,653 liras/square meter. In May, the average sale price was 2.45 million liras.
In Istanbul, the country’s largest city by population, the average home price was 3.96 million liras last month, up from 3.56 million liras in May.
In Ankara, the average price was 2 million liras. The country’s capital experienced an influx of people from the southern provinces hit by the devastating earthquakes in early February, which probably played a role in the 123% year-on-year increase in property prices.
In Antalya, where foreigners are very active in the local property market, the average home price leapt 103% from June 2022 to 3.42 million liras. Last month, 4,503 homes were sold in Antalya, with 22% of those properties sold to foreign nationals.
Stats about house prices
The stagnation, which has been observed in the housing market for a long time and reflected in the number of houses changing hands, has also started to show itself in price statistics. According to these statistics, the housing price increase has reached a standstill.
Recently, the Turkish Statistical Institute (TUIK) and the Central Bank shared data on the housing market.
According to the housing price index created by the Central Bank, the monthly increase in housing prices tends to slow down. This situation is the same for both new houses and second-hand houses.
The Central Bank announced data for May yesterday (July 18). Accordingly, housing prices increased by 3.6 per cent in May and by 103.6 per cent in the last year as of May.
According to the Central Bank, the square meter unit prices of the houses in Turkey averaged 23,574 liras, 36,005 liras in Istanbul, 17,647 liras in Ankara and 27,089 liras in Izmir.
Umut Öz, President of the Didim Real Estate Consultants Association, said: “After the pandemic, it has become quite difficult to predict the housing market.
“There are strange fluctuations in housing sales around the world today. However, in addition to this, we experienced an earthquake process in Turkey. Of course, we recently passed through a political election. These have affected both house prices and consumer behaviour.”
Why are prices so high?
In the last five years, the increase in costs has not only increased the prices of newly built houses but also caused a decrease in housing production, resulting in a reduction of supply and an increase in the prices of existing houses.
However, despite this huge increase, people continued to buy housing, especially after the pandemic.
According to industry representatives, the only reason for the increase in housing sales and rental prices was not the increase in foreign currency costs in the construction industry.
Due to the distrust in the Turkish lira and the insistent policy of the government on keeping interest rates low, citizens avoided saving their money in the bank. Otherwise, their currency would depreciate in foreign currency terms.
Öz said, “In this insecure environment, people saw housing as a means of creation. Therefore, despite the uncontrolled increase in prices, people continued to buy houses.
“However, the latest figures show us that this has changed. People’s purchasing power has changed. As far as we follow, house prices may have to fall below unrealistic prices. Even if prices do not fall, they may be worth less in foreign currency terms in 6 months than today.”