Homes sales in Turkey declined by 27% y/y to 89,626 units in November following the increase of 19% y/y registered in October, national statistics office TUIK reported on December 20.

November’s mortgage sales sank in tandem by 86% y/y to only 5,324 units, following the 79% y/y fall seen in the previous month. This year’s sole annual rise recorded for mortgage sales occurred in June, at a rate of 35% y/y.

For January-November, home sales declined by 3% y/y to 1.24mn units, with mortgage sales down 39% y/y to 269,672 contracts. 

Home sales to foreigners rose by 75% y/y to 35,103 units in the first 11 months.

Turkey has lowered requirements that foreigners must fulfil to acquire Turkish citizenship in a move to encourage investment, according to new regulations published in the government’s Official Gazette on September 19.

Isbank announced on December 20 that it had joined state trio Halkbank, Ziraat Bankasi and Vakifbank in cutting monthly mortgage rates to 0.98% for consumers in a move designed to support the collapsing construction industry, a sector that not too long ago was still seen as the growth engine of the Turkish economy.

In October, Turkish President Recep Tayyip Erdogan said that his Justice and Development Party (AKP) would introduce a bill in parliament switching the main opposition party’s shares in Turkey’s largest listed lender, Isbank, to the Treasury.

Government officials continue “encouraging” private lenders to join public lenders in cutting rates.

Prior to the June snap presidential and parliamentary polls, state-owned lenders were also seen employing mortgage rate cuts.

“Carried almost the whole weight of the economy”
“In 2018, three public lenders [along with Vakifbank’s and Ziraat Bankasi’s Islamic lending units Vakif Katilim and Ziraat Katilim] carried almost the whole weight of the economy,” Vakifbank general manager Mehmet Emin Ozcan said on December 19, reported local business daily Dunya.

Turkish private lender Akbank has received regulatory approval from the Capital Markets Board of Turkey (SPK) to issue up to TRY1.5bn (€247mn) worth of mortgage-backed securities abroad, according to an SPK bulletin released on December 6.

The finance ministry announced on December 7 that Turkiye Kalkinma Bankasi (Turkish Development Bank, or TKB) completed the issuance of TRY3.15bn (€521mn) worth of asset-backed paper based on mortgage-backed securities to be issued by Ziraat Bankasi, Halkbank and Vakifbank and private lender Garanti Bankasi.

Non-operational state-owned lender Emlak Bank will return to operations as an Islamic lender in 2019. It has already started with efforts to improve work in the construction and housing sectors, urbanisation minister Murat Kurum confirmed on November 21 at a parliamentary budget commission.

Annual home price growth in Turkey edged up to 11.30% in October from 10.45% in September, placing it 13.94pp behind annual inflation, central bank data showed on December 18.

TUIK said on November 22 that annual growth in the construction cost index reached 39.66% in September. The index rose 16.18% in December and showed an escalating pace of growth across the first nine months of 2018.

The seasonally-adjusted construction confidence index decreased by 3.5% m/m and fell to a fresh record low of 56.6 in November following the 2.3% recovery in the previous month, TUIK said on November 26.

Turkey's consumer sentiment index rose by 4% m/m to 59.6 in November from the 57.3 reading recorded in October, the lowest level seen since December 2008, data released by TUIK showed on November 22.

Global credit insurers cut exposure
Global credit insurers have cut exposure to some Turkish builders, retailers and other industries in what could be an early warning sign of a spike in bad debts, four people familiar with the matter told Reuters on December 13.

France’s Coface told Reuters it had observed a “need to be more cautious” towards the domestic-focused construction, retail and other industries, as the weaker lira and higher interest rates led to a slowdown in domestic demand.

Last month, the Ministry of Treasury and Finance devised one rescue plan that would allow construction and real estate companies to offload unsold stock to a state-backed fund. Subsequent proceeds would then be channelled into repaying banks beset by mounting bad debts amid the lira crisis.

In late August, the government backed the latest campaign in Turkey to stimulate home sales. Turkish property developers were targeting the sale of at least 25% of 100,000 discounted homes to be included in a campaign to run from August 29 to October 31, urbanisation minister Kurum said.

Kurum said on September 20 that more than 3,000 homes were sold under the scope of the campaign, according to BloombergHT.

There are a total of 1.5mn-2mn unsold homes in Turkey, according to sector representatives.

The country’s construction industry saw a pronounced collapse in activity in the third quarter of this year.

The industry contracted by 5.3% y/y in the quarter versus a 6.7% y/y expansion in the first three months of the year.

Turkey’s GDP growth on the other hand, slowed to 1.6% y/y in the third quarter from 7.2% y/y in the first quarter and 5.3% y/y in the second quarter.

Within the overall decline in Q3, the biggest slump was registered by the construction industry.

The sector grew by 9% y/y in 2017.

Home sales rose by 5% y/y to 1.41mn units in 2017, marking a new all-time high, following the 4% y/y gain in 2016 to 1.34mn units.

Mortgage sales rose by 5% y/y to 473,099 contracts in 2017.

Property sales to foreigners increased 22% y/y to 22,234 units last year.