According to data released last week, house prices increased by 1.9 percent in November compared to the previous month and 82.8 percent compared to the previous year. Thus, it was the lowest monthly increase in the last 34 months and the lowest annual increase in the last 22 months. In addition, the November house price increase was also below the monthly inflation. In addition, the November house price increase was also below the monthly inflation.
House price growth has been above inflation since roughly the beginning of 2020. The gap between the two indicators started to widen after September 2020. After the policy rate went negative in real terms, real estate became an investment instrument.
In the fall of 2022, house prices increased at an annual rate of 189 percent, while inflation was around 85 percent. As house prices, both new and old, reached levels that were no longer affordable or rational for many people, the rate of price growth began to slow down.
Month-on-month house price growth has been below inflation in four of the last five months since July. In some regions, prices fell for the first time in November. Historical data shows that there have been exceptional declines in house prices in TRY terms across the country, albeit not long-term declines. So, can there be a decline in prices in the coming period?
Prices are still high. The price of a 120 square-meter house, which was USD 90,000 on average in Turkey in previous years, was USD 125,000 in November. It is 50 percent higher than that in Istanbul. Those who have enough assets to buy a house without using credit are not very eager to buy a house at this price level. As a matter of fact, housing sales have been declining for about a year and a half.
Interest rates are not favorable for housing loans. The current interest rate level will not decline until the fall. When interest rates start to fall, housing loan utilization cannot jump simultaneously.
It is not possible to say whether there will be a decline in house prices in TRY terms in the coming months. But it is possible to say that the price increase will remain below inflation for a long time.