Turkey home sales slide 16 percent in blow to key sector of economy
Sales of homes in Turkey fell for the third-straight month in October as interest rate hikes hit demand for mortgages in an industry that drove economic growth over the past decade.
House sales fell by an annual 16 percent to 119,574 units last month, the Turkish Statistical Institute said on Monday. On a month-on-month basis, they dropped by 12 percent. Monthly sales have now slid by 48 percent since a July peak of 229,357 units.
Purchases of homes via mortgage lending slumped by an annual 49 percent in October to 25,566 units, the institute said. Purchases with such loans had stood at 130,721 units in July.
Turkish President Recep Tayyip Erdoğan’s government placed the construction industry at the centre of an economic transformation in the country that saw economic growth outpace many of its emerging market peers over the past decade. The building boom, which has benefitted Erdoğan’s closest business allies, turned into a slump in 2016 when a currency crisis swept through financial markets. The sector has yet to recover, with many new homes still unsold.
The number of houses sold for the first time slid by an annual 26 percent in October to 36,976 units, the statistics institute said.
Home sales in Turkey are dipping after the central bank almost doubled the average cost of funding for banks to around 14.5 percent last week from 7.5 percent in July to help defend the lira, which has dropped to successive record lows against the dollar.
Investors are now calling on the central bank to hike interest rates substantially at a meeting on Thursday to further bolster the currency, which has rallied by more than 10 percent over the past week after Erdoğan sacked the central bank’s governor and replaced him with a respected technocrat.
But the higher borrowing costs have already prompted banks to increase interest rates on loans such as mortgages sharply. The central bank had previously slashed its benchmark interest rate by almost two-thirds from 24 percent in a series of reductions that began in July last year to back economic stimulus measures by the government. It raised the rate by 2 percentage points to 10.25 percent in September.