Turkish house sales tumbled 48.6% year-on-year in June, the sixth consecutive month of declines, official data showed on Wednesday, as the property market continued to feel the impact of an economic slowdown and high mortgage interest rates.
The decline was particularly driven by a week-long public holiday at the start of June to mark the end of the Islamic fasting month of Ramadan, and a re-run of the Istanbul election.
Turkey’s economy shrank 2.6% in the first quarter after a 3% contraction the previous quarter amid a currency crisis and high inflation, ending a construction-fuelled boom.
Turkey’s Statistical Institute (TUIK) said June home sales totalled 61,355. It was the deepest year-on-year fall in 2019.
Makbule Yonel Maya, general manager at the company TSKB Real Estate Appraisal, said the low level of June sales reflected the impact of the post-Ramadan holiday.
“If we consider that land registry offices did not conduct transactions for a week due to the public holiday, there were just three weeks of sales in June,” she told Reuters, adding that sales were also put on hold due to the election process.
The decline was also driven by a slump in mortgaged house sales by 84.6% in June to 7,319 properties as a result of high interest rates, Maya said.
She said the weak sales trend was expected to continue in July and August, with the market expected to pick up from September if interest rates fall and mortgaged sales recover.
Mortgage rates at state banks, lower than those at private banks, currently stand at a monthly 1.65% for 10-year loans.
Turkey’s central bank is expected to make a deeper than previously foreseen cut in its key interest rate on July 25 after President Tayyip Erdogan dismissed its governor, a Reuters poll showed last week.
House sales fell 6.8% in April and 23.2% in May. These declines were revised from an initial 18.1% and 31.3% respectively after the land registry supplied updated figures on sales, according to TUIK.
One bright spot, as in previous months, was house sales to foreigners. These increased 30.5% in June to 2,689 houses, with the buyers by country led by Iraqis, Iranians and Russians.
The boost from foreign property investors has been felt since last year due to the weakness of the Turkish lira and a government effort to ease the path to Turkish citizenship.
Turkey last year decided to slash the investment threshold for gaining citizenship to $250,000 from $1 million previously. The measure was aimed at keeping money flowing into an economy that was driven for years by a construction boom.
A near-30% drop in the lira last year, and another 7% decline so far in 2019, has made it cheaper for foreign buyers.