Turkeys Housing Boom Reaches Alarming Heights
News Posted On: 04 June 2014
The Central Bank findings report that house prices in Turkey have skyrocketed to levels over the average inflation rates. The increase in interest rates and reduction in demand has caused a considerable drop in transactions, and especially with mortgage sales.
The price index for the housing sector, as posted by the Central Bank shows that prices reveals a year-on-year growth by nearly 20 percent in February 2014 in Istanbul. Ankara and Izmir registered price increases of about 15 and 14 percent respectively. These prices are well over the inflation rates averaging at about 8 percent.
Housing prices report abnormal hikes
The price hikes seen in the housing sector in the four year period up till February 2014 was 80 percent with a rise in inflation of about 33 percent. Commercial office assets noticed the prices ballooning as well. The effects of the ballooning are predominant in rental rates that have not reported any expansions as with other property prices.
While the CPI (consumer price index) has been picking up by nearly 7-8 percent every year, rental rates increase by only 4-5 percent. The trend shows that while the asset itself is increasing in value by nearly 20 percent, it's rental units report a meager increase of 5 percent, reflecting that there has been an abnormal increase in housing asset prices.
Loan sales numbers take a beating throughout Turkey
House sales transactions statistics from the Turkish Statistical Institute reveals that mortgage loan sales have shown a 50 percent decline in 2014's initial four months. The same period saw 42 units bought through credit for every 100 transactions last year, while the ratio has climbed down to about 30 percent this year.
Istanbul property, reported sales of 80,000 units in the 2013's initial four month period, while their numbers stood under 70,000 units , with a 15 percent decline. The loan sales dropped to 25,000 during the period, and credited sales dropped by 47 percent.
Ankara registered a sharper decline in loan related house purchases. The Ankara real-estate market reported a drop in housing sales by 18 percent during the January-April 2014, taking into account last year's value during the period.
Meanwhile, mortgage sales plummeted by about 70 percent. The mortgage sales numbers stood at 22,000 during the initial four months of 2013, and showed a year-on-year drop to 13,000 for this year.
Property sales decline
The abnormal price hikes in the housing market had an affect on property transactions as well. The Turkish Statistical Institute says that the January-April period this year saw 8 percent drop in sales, when compared to last year's values during the period. Turkey reported 341,000 residential property sales in the January-April period this year, falling behind last year's transactions during the period by nearly 28,000 units.
Contractors are concerned over the tangible decline seen in sales in the housing market, and the reduced enthusiasm that home loans are being met with. Investors are urging the government to lower interest rates, although lowering interest rates can have dire consequences, given the current inflation rates.
Written by Les Calvert
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