Turkey: November housing prices increases by 50,53% annually


According to CBRT data; HPI, which increased by 50.5% in November, increased by 19.7% in real terms. Real house prices recorded their 23rd consecutive monthly gain. The rate of change in real housing prices has increased in the last five months.


We observe the effects of the increase in building costs, along with the factors coming from the exchange rate and inflation, in the acceleration of the increase in housing prices. The demand environment in the shrinking housing stock also increases the price volatility in the housing market. While the changes in housing supply and demand, especially after the Covid-19 pandemic, affect prices through financing costs and household demand; In the next stage, with the volatility in the exchange rates, the current prices in many regions increased significantly. This has been effective in the rapid rise in housing and rent inflation. Especially the constraints in the housing supply and at this point, housing prices and rents that exceed the purchasing power due to inflation stand at the center of this. We think that this situation may be reflected in housing demand in the form of a demand shock from local households and a general slowdown in the construction sector.


It is also useful to look at the sectoral stagnation effect in terms of housing loan interest rates. In the context of increasing financial volatility with the Covid-19 epidemic, serious incentive mechanisms were put into use to help economies overcome the shock of the closure. This situation was realized in the form of credit incentives in Turkey in the 2Q20 and 3Q20 periods. However, the lira interest rates were increased again due to the temporary tightening policies implemented to contain the price stability risks stemming from the exchange rate. Despite the decrease in credit costs in the last few months, bank rates, which remain high within the framework of both the inflation effect and the risk profile that cannot create actual financial tightening, are a factor in the slowdown of the sector and keeping it under inflationary pressure. We expect the effect of exchange rate volatility and construction costs to be effective in the increase in housing prices.

Kaynak Tera Yatırım-Enver Erkan
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