Turkish property prices slide in March; Istanbul leads the drop

Turkish residential property prices slumped in March when taking into account the erosive effects of inflation, according to central bank figures published on Friday.

Prices fell an annual 13.6 percent in real terms, the central bank said on its website. Annual consumer price inflation was 19.7 percent in March and 19.5 percent in April.

When excluding inflation, prices rose 3.5 percent nationally, the slowest increase since at least April 2018. The index stood at 109.31 in March with 2017 taken as the base year with a value of 100 points.

Prices dropped 1.7 percent in Istanbul, excluding the inflationary effects. The city-based index fell to 99.3 points, the bank said.

Turkey’s housing market is in the middle of a slump after a currency crisis last year sent interest rates on mortgages soaring and slashed consumer spending power. The government has cut taxes on home purchases and offered cheap lending via state-run banks to help spur a revival in the industry and reduce stocks of new homes lying empty across Turkey’s major cities.

On a monthly basis, house prices increased 0.4 percent country-wide after 1 percent growth in March.

Home sales are also in decline. They fell an annual 18 percent to 84,403 units in April, the Turkish Statistical Institute said on its website on Thursday. Sales had dropped an annual 5.3 percent in March.

Turkey’s government plans to set up a special fund to offload the troubled loans of real estate companies from banks' balance sheets and free up more lending to the economy. The step, along with a similar measure for energy industry loans, is a lynchpin of a plan to help reverse an economic recession.

Some analysts are concerned that a continuation of Turkey's downturn will lead the government to take populist measures ahead of a rerun of mayoral elections for Istanbul on June 23. Spending and lower tax revenue meant that the budget deficit stood at 68 percent of the government's year-end goal after the first four months of 2019, rendering the target virtually obsolete.