Property prices in Istanbul and across Turkey saw significant increases in August 2024, as home sales reached the highest level of the year. According to data from the Turkish Statistical Institute (TÜİK), property sales grew by 9.9% compared to the same month in 2023, with a total of 134,155 homes sold. Istanbul, Ankara, and İzmir led the way, with 19,467, 12,496, and 7,044 sales respectively.
However, the exceptionally high cost of borrowing is slowing down mortgage-related transactions. High mortgage interest rates contributed to a 17.1% drop in mortgaged home sales, which fell to 13,574 units, making up just 10.1% of total sales. Conversely, first-hand property sales surged by 18.7% to 41,913 units, while second-hand sales saw a 6.3% increase, hitting 92,242 units. This is a government driven program to fight high inflation seen in Turkey since summer 2023.
Foreign Buyer Interest Declines
The cooling interest from foreign buyers, particularly from Russia and Ukraine, is another notable trend. Sales to foreigners plummeted by 26.2%, falling to 2,257 units in August. While Russia remains the top country for foreign buyers, Iran has overtaken Ukraine for second place. Antalya continues to be the most popular city for foreign buyers, but the share of foreign sales has dropped sharply, from 27% of all sales in 2023 to just 12% in August 2024.
Property Prices in Istanbul Continue to Climb
After a long downturn in reat estate prices, property prices in Istanbul and nationwide have risen in the last two months – signifying a change in the downtrend. The Turkish House Price Index (HPI) showed that prices increased by 3.6% in August compared to the previous month, while year-on-year, nominal prices jumped by 34.3%. Analysts are now observing a market consolidation amid expectations by the general public that prices will rise steeper in the coming months.
Looking Ahead: Interest Rates and Supply Shortages
Experts predict that property prices in Istanbul and across Turkey could rise even more sharply in the coming months. The Central Bank of Turkey is expected to begin lowering interest rates in January 2025, which would likely stimulate further demand in the housing market. This, combined with a sharp decline in the availability of new apartments due to a record low in building permits, could result in a significant supply-side shock. The lack of new housing is expected to push prices up even further, as the gap between supply and demand widens.
For those considering buying property in Istanbul, these factors are essential to keep in mind. With both demand and prices expected to increase, particularly as borrowing costs fall, the window for lower prices is narrowing. The ongoing supply issues could make property investments in Istanbul even more competitive heading into 2024, underscoring the importance of acting quickly in this fast-moving market.
Inflation in Turkey Eases in August Due to Base rate Effect
In August, Turkey’s Consumer Price Index (CPI) showed signs of slowing, helped by a favourable base rate effect. According to data from the Turkish Statistical Institute (TÜİK), monthly inflation came in at 2.47%, with annual inflation falling to 51.97%, down from 61.78% in July.
The largest price increase was observed in the education sector, with a monthly rise of 11.34% and a staggering 120.81% year-on-year. The housing sector also saw significant price increases, driven by natural gas hikes, with monthly inflation at 8.51% and annual inflation at 101.49%. Food and non-alcoholic beverages were the only category to record a monthly decline, dropping by 1.10%. Meanwhile, producer price inflation continued its downward trend, with annual growth slowing to 35.75%, the lowest level in 40 months.
Central Bank Deputy Governor Hatice Karahan commented on the inflation data, stating, “The continued weakening of core inflation trends is critical for the disinflation path we are targeting. The August figures tell us that while inflation in goods is moderating, there is still rigidity in the services sector.”
