Residential property sales in Turkey surged 25.1% year-over-year in January, official data showed on Friday, but dropped from the extremely high level a month earlier.
Sales jumped to 88,306 properties in January, the Turkish Statistical Institute (TurkStat) said. Total sales in December had soared 113.7% year-over-year to 226,503, the data showed.
The reading of last month reflected last year’s low base effect caused by the coronavirus pandemic when sales were well below historical averages, sector analysts said. Sales were thus more than 60% lower than in December.
"Due to restrictions and weak sales during the pandemic, we have a low base effect. Turkey’s average monthly house sales are around 100,000-110,000 units," said Makbule Yönel Maya, general manager of the TSKB Real Estate Appraisal company.
According to central bank data, new house prices surged 67% year-on-year in December. Official data for January showed consumer prices rose by 48.69% annually, a 20-year high. The government has pledged to act and vowed to safeguard households against soaring prices.
"We have several reasons for the weakening demand: high inflation, skyrocketing house prices and high mortgage rates. People are pausing investing in houses," Maya said.
Monthly mortgage rates for new houses are close to 2% among private banks.
Istanbul, Turkey's largest city by population, had the highest share with 17.1%, or 15,110, house sales in January, followed by the capital Ankara with 9.3%, or 8,255, and the Aegean province of Izmir with 6.2%, or 5,486.
The data showed January mortgage sales jumped 69.4% from a year earlier to 18,183.
Real estate sales had accelerated amid a depreciation in the Turkish lira, with the authorities pursuing the new economic policy of low interest rates to boost credit, exports and investments, saying it would help the country weather inflation.
To support the drive, Turkey’s central bank had brought down the benchmark policy rate by 500 points since September to 14% but paused the easing cycle in January and kept the one-week repo rate unchanged this week again.
In 2021 as a whole, total house sales dropped 0.5% to around 1.49 million properties, with mortgaged sales down 49%.
The lira has been broadly stable since the start of the year following a 44% decline in 2021. It traded 0.3% lower at 13.63 against the United States dollar as of 3 p.m. local time (12 p.m. GMT) on Friday and eyed a weekly decline of 0.8%.
Builder touts land sales
With buyers pausing investment in houses due to surging inflation, one major builder is offering buyers land instead of homes as a novel way for Turks to invest in real estate.
Against the backdrop of the surge in house sales in the latter part of 2021, the sector has now run out of steam as property prices have soared far above headline inflation. As a result, property developer Nef has turned to land sales as an alternative for investors.
"Turkish people still treat real estate as the best investment instrument. But it is getting harder for many Turks to afford a house. So, this is a cheaper and profitable alternative," said Nef Chairperson Erden Timur.
Timur said the per square meter price of Nef’s land project in northwest Turkey’s Çanakkale region had risen to TL 1,500 ($110) from TL 800 lira five months ago.
"Investing in land instead of a house is a cheaper alternative," he told Reuters. "You can build your house when you have more money, or just wait for some time and sell your land to make a profit."
Given strong demand, Nef will invest a further TL 3.4 billion in their land business, he said.
Sales to foreigners up over 55%
Meanwhile, sales to foreigners maintained an upward trend and climbed 56.5% year-over-year in January to 4,186 properties.
Some 4.7% of all sales in January were made to foreigners, the data showed.
Istanbul enjoyed the lion's share of sales to foreign buyers, with 1,771 units. The Mediterranean holiday resort city of Antalya followed with 914 properties, while Ankara came third with 269.
Among foreign nationals, Iranians bought the most houses at 761, followed by Iraqis with 513 and Russians with 479.
Property sales to foreign buyers were strong throughout 2021 and had exceeded the annual threshold of 50,000 units for the first time through November even before the year-end.
Sales ended 2021 with a 43.5% year-over-year increase to hit 58,576 units. The previous annual record was set in 2019 when 45,483 houses were sold to foreigners in 12 months.