Jul 19 2018

Turkish house sales surge as mortgages reverse slump

Sales of houses in Turkey surged an annual 22 percent in the month of June from a year earlier amid a strong revival in mortgage lending, according to data from the Turkish Statistical Institute.

Sales climbed to 119,413 units, the institute said on Thursday. Sales via mortgage lending jumped 35 percent after a decline of 12 percent in May, it said. Mortgage sales had a 40 percent share in total house sales versus 31 percent the previous month.

Turkey’s government is seeking to stimulate demand for housing -- the construction industry has helped President Recep Tayyip Erdoğan spur economic growth since he came to power in 2003. Turkey has slashed interest rates on mortgages offered by state-run banks to below 1 percent monthly, a key psychological barrier for consumer borrowing. It has also ordered real estate agents to reduce commissions. Construction companies have also offered large discounts on new homes.

Sales of new homes increased by 26 percent yearly to 57,064 units. The increase was an annual 4.8 percent in May.

Investors in Turkey are looking for signs that economic growth in Turkey is slowing after it surged an average of more than 8 percent annually in the nine months to March. The expansion has fueled concerns about overheating and a hard landing, prompting investors to sell Turkish lira assets. As a result, the currency has slumped by about 20 percent against the dollar this year.

President Recep Tayyip Erdoğan is calling on banks to lower lending costs to consumers and businesses to help bolster economic growth. He opposes higher interest rates, saying they are inflationary.

Despite the president’s stance on interest rates, the central bank raised its benchmark rate by 425 basis points in May and June to 17.75 percent after the lira’s record lows raised concern about a currency crisis.