The global financial crisis struck a staggering blow to the Turkish real estate market between 2007 and 2011, but a recovery may finally be in the offing. Residential property prices increased 9.13% when adjusted for inflation for the year ending in January 2013, according to statistics from REIDEN. Construction rates are up and interest rates have plummeted, providing a jolt to the market on both the supply and demand side. Also helping is that Turkey has ended two major restrictions to foreign property buyers, which has opened up the market to many new potential investors. For more on this continue reading the following article from Global Property Guide.
Turkey’s property market is rising strongly, after lacklustre performance in recent years.
Nationwide residential sales prices for existing homes soared 17.11% during the year to January 2013, according to REIDIN. When adjusted for inflation, house prices rose 9.13%.
The REIDIN Turkey residential property price indices (TRPPIs) are calculated monthly and cover 7 major cities, their 71 districts and 481 sub-districts. The national TRPPI is a weighted average of those city indices. It uses June 2007 as the base year (June 2007=100).
During the year to January 2013:
- In Ankara, the capital, sales prices for existing homes rose 13.92%
- In Adana, house prices rose 16.54%
- In Antalya, house prices rose 22.62%
- In Bursa, house prices rose 9.42%
- In Istanbul, the residential sales prices for existing homes rose 19.47%
- In Izmir, house prices rose 16.07%
- In Kocaeli, house prices rose 6.74%
In the primary housing market, prices are also rising, albeit at a slower pace. REIDIN’s GYODER new home price index rose by 9.24% (1.8% inflation-adjusted) during the year to January 2013.
This is in line with data published by the Central Bank of the Republic of Turkey (CBRT) which showed that existing home prices rose by 11.5% (5.1% inflation-adjusted) in 2012 from the previous year. Over the same period, prices for newly-built houses increased by 12.5% (6% inflation-adjusted).
The total number of houses sold rose by 1.76% to 103,543 units in the third quarter of 2012 from the same period last year, according to the Turkish Statistics Institute (TurkStat). However, housing sales actually dropped by 2.35% in Q3 2012 from the previous quarter.
Property prices in Turkey are expected to continue rising in 2013, according to some local property experts.
Primary market: smaller house prices rising faster
Smaller-sized houses in Turkey have seen the highest price increases in the primary housing market during the year to January 2013.
- The average price of 51-75 square metre (sq. m.) newly built houses rose by 9.9%
- Prices of 76-100 sq. m. houses rose by 9.59%
- Prices of 101-125 sq. m. houses increased by 9.31%
- Prices of 126-150 sq. m. houses rose by 8.75%
- The average price of 151 sq. m. and bigger sized properties increased by 7.58%
Global crisis hit Turkey’s housing market
Over the period 2007 to 2011, house prices in Turkey fell by 2% (-29% inflation-adjusted). From an annual average GDP growth of 6.8% in 2002-2007, Turkey’s growth slowed sharply to 0.7% in 2008, mainly due to the global financial meltdown. Existing house prices plunged 22.45% (-14.65% inflation-adjusted) in 2008.
Turkey’s economy remained depressed in 2009, with real GDP contracting 4.8%. Despite this, existing house prices rose a nominal 3.52% y-o-y in 2009, by 2.63% in 2010 and by another 7.81% in 2011. But when adjusted for inflation, house prices actually dropped by 2.82% in 2009, by 3.54% in 2010 and by 2.39% in 2011.
Now, construction activity is rising
The total number of permits (for two and more dwelling residential buildings) rose 16% to around 722,600 units in 2012, after declining by 24.8% the previous year, according to the CBRT. The total value increased 27.3% to TRY75.3 billion (US$41.6 billion) in 2012.
From 2005 to 2009, the average number of dwelling permits (for two and more dwelling residential buildings) was around 520,000 per year. Then in 2010, it soared by 83.4% to 829,000 units, in line with the 9.2% real GDP growth.
Interest rates have declined dramatically
Turkey’s mortgage market has expanded rapidly in recent years, mainly fuelled by falling interest rates. Total outstanding housing loans increased almost six times, from TRY12.4 billion (US$6.8 billion) in 2005 (about 1.9% of GDP) to TRY86 billion (US$47.5 billion) in 2012 (6.1% of GDP).
In 2012, total outstanding housing loans in Turkey rose by 15.4%. Deposit money banks hold almost 92.4% of outstanding housing loans, while participation banks hold 7.6%.
Non-performing housing loans fell to about 0.8% in the third quarter of 2012, down from 0.9% in 2011 and 1.4% in 2010.
Over the past decade average interest rates on housing loans in Turkey have fallen enormously, from about 48.25% in 2002, to just 9.46% in March 2013, according to the CBRT. In May 2010, the CBRT adopted the one-week repo rate as policy rate, then cut this rate four times from 7% in May 2010 to 5.5% in December 2012. The CBRT has kept it at 5.5% since then, while cutting the borrowing rate from 4.75% to 4.5%, and the lending rate from 8.75% to 8.5%.
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