Two data on housing were announced yesterday. One was the house price index for June and the other was the house sales statistics for July.
➔Housing prices continue their high flight course with an increase of 9 percent in June. There is no contradiction here. The annual increase increased to 160.57 percent. It rose to a record after 2010, when the index began to be published.
➔The increase in housing prices in the first half of the year reached 90 percent, and the 9-month increase after September 2021, when the interest rate cuts started, reached 136 percent.
NEGATIVE INTEREST AND EXHIBITION EFFECT
➔The main factor that caused the prices to skyrocket and record sales in housing and real estate was the rapid rise in inflation despite the reduction in interest rates. We think that real interest rates have dropped to the lowest level in Turkey’s history.
While the Central Bank policy rate was 14 percent, consumer inflation rose to 79.60 percent. The numerical difference is 65.6 points, the highest negative interest rate in the world.
➔ In addition to the domestic investment-purpose housing and non-residential real estate purchases, the demand of expatriates who could not come to Turkey for two years due to the pandemic has also increased the real estate prices.
The increase in sales to foreigners was also among the important factors that led to price increases. In the first half of the year, sales to foreigners increased by 72 percent compared to the same period of 2021 and reached 35,755 units.
While the total rate of sales to foreigners was 3.7 percent in the first half of 2021, it increased to 4.9 percent in the first half of 2022.
THE FINAL TOUCH ON PRICES FROM FOREIGNERS
With Russia’s occupation of Ukraine, there has been a significant increase in demand from Russians for residences in the Mediterranean and especially in Antalya. As a matter of fact, the Russians ranked first among the foreign nationals who bought the most housing in Turkey.
➔Antalya became the province with the highest number of housing sales to foreigners (1,421 units in July) with house sales to Russians, surpassing Istanbul.
➔Foreigners buy 31 of every 100 houses sold in Antalya. In Istanbul, which ranks second, 8 out of every 100 residences go to foreigners. In Mersin, 12 of every 100 houses are sold to foreigners.
➔In response to this, as can be seen in the adjacent Central Bank table, housing prices in Antalya have increased by 200 percent in the last year.
➔Antalya has taken the lead in price increase since March and continues to do so. The previous price increase leader was Muğla.
➔Istanbul, on the other hand, ranks second in price increase with 185 percent in a year.
➔ Mersin takes the third place in price increase with 176 percent.
WHAT DOES THE FIRST REDUCTION IN SALES SIGNAL?
➔The photo of the record increase in prices belongs to the first half of the year.
In the first half, house sales increased by 31.4 percent to 726,398. As of June, one-year house sales rose to a record level with 1 million 665 thousand.
➔ Prices and demand are parallel to each other, supporting each other.
➔July housing sales were announced yesterday. Sales fell for the first time in a year, down 12.9 percent. That’s where the confusing number came from.
➔Let’s see if the housing prices in July, which will be announced a month later, will support the decline in sales. It will become clear to what extent the decrease in sales is reflected in prices.
➔The decrease in sales is an important sign of the strength of demand and price. Because prices have been on an upward trend since May 2019 and have been rising like missiles since last fall.
➔As it is adjacent, the one-year nominal increase reached 160 percent and the real increase reached 45 percent. There is an increase that doubles the annual inflation and housing prices have entered the stage of ballooning.
➔However, the decrease in sales may not be enough for a one-month data, a clear opinion. Seeing the realization of a month or two may give a better idea.
FIRST MOVE FROM BUYERS
➔Besides, other reasons may play a role in the partial withdrawal of sellers.
➔The social housing project to be carried out by TOKİ, which will be launched in 81 provinces and will be comprehensively announced on September 17, was announced in early July. Buyers may have been asked to see how much this project will increase the housing supply and their prices.
➔Since we think that negative interest rates play a dominant role in house price increases, we do not anticipate that the decline in sales will reflect on prices to the same extent.
➔If the buyers initially pulled back because of the high prices, it means that the arm wrestling has just begun.
➔ Prices will not be able to rise like missiles from now on. Don’t even rise. It has exceeded the purchasing power of the people. It started to play a leading role in pushing inflation up.
SELLERS CAN ALSO WITHDRAW
➔However second move after buyers may come from sellers and they may withdraw as well. Generally, our house sellers are full sellers, they are patient.
In this case, less housing will be subject to purchase and sale. On an annual basis, home sales are down from 1 million 655 thousand and may close the year at just over 1.5 million and at a record level.
➔With mutual withdrawal, the supply-demand balance or the imbalance that raises prices does not change much, and prices do not decrease much.
➔Because the conditions are in favor of housing sellers. Interest rates continue to be negative on a very high scale. Money is plentiful and there are not many alternative areas where money can go.
➔There is also a rapid migration from outside to Turkey, population growth is also fast. New housing construction, on the other hand, is progressing slowly due to the rapid change in costs. In short, the housing supply is below the housing demand.