Turkish Residential Property Market Cools Down but Remains Resilient

Turkish overheated residential property market shows the signs of cooling. According to the Turkish Statistical Institute (TurkStat), 102,656 residential properties were sold in the country in September, marking a 9.5% decrease from the previous year. Sales also fell by 16.4% compared to August.

Mortgage purchases, which account for roughly 10-20% of the total market, plunged by about half from August and decreased by 38% on an annual basis, while cash transactions, representing the majority of purchases, only dipped by 11% year-over-year, with monthly volumes maintaining well above the long-term average.

This cooling period follows a significant surge in house prices, which, by the end of June, had soared by 96% from the previous 12 months, far exceeding the global average of 3-4%, according to Knight Frank, a residential property consultancy.

This is concurrent with a major shift in the country’s monetary policy, which saw its central bank increase target rates dramatically from 8.5% in June to 35% in October to curb persistently high inflation.

Nevertheless, the market is demonstrating resilience, with asking prices remaining relatively stable in US dollar terms, despite the Turkish lira’s devaluation.

According to Housearch.com, an online property search platform, Turkey continues to be an appealing market for property investors, with an anticipated cumulative average annual growth rate of 8% leading up to 2027.

The annual decline in property sales to foreign buyers in 2023 can be primarily ascribed to the “high base effect” of 2022, a year that saw a record 67,490 homes sold to foreigners, approximately a quarter of whom were Russians and Ukrainians seeking to leave their countries due to conflict.

The recent military confrontations between Israel and Hamas have not deterred investors, despite Turkey’s leadership expressing strong criticism of Israel. Contrary to concerns about Turkey’s potential involvement in hostilities, investor confidence remains steady.

In fact, the growing instability in the Middle East could potentially increase demand, as was the case during the 2017-2018 conflict with ISIS, which led to affluent migrants from the region relocating to Turkey and doubling the annual number of property sales to foreign buyers.

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