Turkey’s central bank cut its key repo rate by a more than expected 425 basis points on July 25 in its first step away from the emergency stance adopted during last year’s currency crisis. Last week, the bank cut the rate by another 325 basis points to 16.5%.
Housing sales with mortgages, which constitute more than 30% of total sales in the sector in August, jumped 168% year-on-year, the data showed.
“The increase in housing sales with loans is the main element pushing house sales upwards as the banks, especially state banks, reduced interest rates for house-buying customers following the central bank’s rate cut,” said Tamer Cicekci, general manager of Reha Medin Real Estate.
“We expect housing sales to reach 1 million units this year with favourable conditions.”
Turkey’s Statistical Institute said home sales totalled 110,538 in August. In July, sales had fallen 17.5% year-on-year as an economic slowdown and high mortgage rates continued to hit the property market.
The increase in demand could cause a housing supply shortage from next year if construction companies don’t start new projects, particularly in Istanbul which is home to about a fifth of Turkey’s 82 million population, according to Cathay Group, a construction company active in the real estate sector.
“Demand for houses had been at the bottom for a while, the sector adjusted accordingly for the past two years,” Cathay Group Chairman Mahmut Alper Tugsuz told Reuters in an interview last week. “The downward trend in interest rates will increase demand.”
“If it continues like this, there will not be enough supply of houses to meet the demand in 1-2 years, especially in Istanbul.”