Housing construction increases, sales decline

MUNICIPALITIES issued licenses for the construction of 212,000 houses during the first half of the year. It’s more accurate to say: “Those who will build houses received licenses.” There’s been a rapid increase on a quarterly basis. A total of 81,000 licenses in the first quarter, 131,000 in the second. Also, there’s been a strong increase on an annual basis. The municipalities issued licenses for the construction of 46,000 houses in the second quarter of 2019; this increased to 131,000 in the same period of 2020.

It’s a remarkable increase compared with the previous quarter or the previous year, but we should take a look at previous years as well: The 212,000 licenses for housing construction represent the lowest level since 2006.

But what’s important is that there is a recovery in the number of licenses following the sharp decline last year.

A total of 58,000 and 143,000 licenses were issued during the third and fourth quarters of the previous year. So there will be an increase in the third quarter. If the number of licenses increases above the same period of the previous year, it will signal an upward trend in housing construction.

There was a slowdown in new construction subject to licenses and as a result, the number of houses with occupancy permits decreased. This decline was apparent in the first quarter but it became more moderate in the second quarter. The number of housing units built with occupancy permits decreased to 269,000 from 397,000 during the first half of the year.

Although this was below last year’s number, the number of occupancy permits is still above construction with building licenses. While the number of licenses for new construction is generally high, the trend reversed during the last three years.


A total of 229,000 houses were sold in July following the 190,000 house sales in June. House sales will rapidly decline in August because the 15-month maturity with a one-year refundable and 0.64% interest rate on loans is over. Those who bought a house during this period benefitted from these conditions.

I wrote before about how the total number of house sales is not important. What’s important is first house sales. The total number of house sales amounted to 229,000 in July, but first sales stand at 68,000, a 75% increase largely due to mortgaged sales. First sales did not increase that much during the first seven months of the year, rising to 266,000, up from 245,000 during the same period in 2019.


A total of 231,000 houses were sold in two months through cheap and advantageous loans. But not all of these houses were first time sales. First house sales constitute 71,000 of the total amount, and they reached 32,000 in June and 39,000 in July. Mortgaged house sales amounted to 69,000 and 91,000 in June
and July, respectively. No one should try to console anybody with the number of house sales in these two months. The mortgaged first house sales are important, and they amounted to 71,000 in June and July. But
these sales represent only 17% of the total amount.

How much will the GDP decline?

INDUSTRIAL production’s share in Gross Domestic Product (GDP) is around 20%, and that’s why it significantly affects the GDP. This connection is apparent in the graph. I stated that industrial production
decreased by 16.8% in the second quarter. Normally there should be a decline in GDP parallel to the decrease in industrial production.

From time to time, this parallelism is absent and the total change in GDP may be better or worse than industry. For example, the services sector, with a 22.23% share in the GDP, may perform better than industry, and the GDP increase may be above the industrial increase. This happens from time to time but we will not see this scenario this year – the services sector experienced a worse period than industry. Nearly all businesses were closed in April, the first month of the second quarter. These businesses began to reopen in the first half of May. The tourism sector has just begun to recover.

Hence, it’s not possible to talk about different factors that would curb the impact of the weak performance of industry and reduce the GDP change below the 16.8% decline in industrial production. On the contrary, there are new developments that will widen the 16.8% decline. That’s why the decline in the second quarter may be around 15-20%.

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