Real Estate

Turkish home sales drop by 44% after earthquakes

July 19, 2023, 4:18 AM

Just 83,636 homes were sold in June, reports Turkish Statistical Institute
Property experts point to impact of inflation and February’s earthquakes
Eid al-Adha holiday also contributed to year-on-year decline

Macroeconomic trends, a quirk of the calendar and the market fallout from February’s earthquakes have led to a 44 percent drop in Turkish home sales, experts have told AGBI.

A total of 83,636 homes were sold in Turkey in June, according to the Turkish Statistical Institute, compared to 150,509 during the same month last year.

Sales in Istanbul made up 16.3 percent of the total, with the capital Ankara on 8.3 percent.

Sales of property to non-Turkish buyers have also fallen. A total of 2,625 houses were sold to foreigners last month, down 69.6 percent on June 2022.

Zeynep Sinem Konca, head of valuation and advisory services at CBRE Turkey, said the decline was partly due to a quirk of the calendar.

“In June last year, there were 22 working days. Now, because of the Eid al-Adha holiday, there were only 17 working days. Residential experts believe that 23 percent of the decrease is a result of this calendar effect.”

She added that the data for sales to overseas buyers looks particularly stark because June 2022 was the busiest month on record for such deals.

In June 2023, Russia was the number one nation for overseas buyers with 733 sales. It was followed by Iran at 333, Iraq at 175, Ukraine at 168 and Kazakhstan at 142.

Konca added that the earthquakes that hit southern Turkey in February — causing more than 50,000 deaths — also played a role.

“After that, people are more interested in newly constructed buildings, especially foreigners,” she said.

However, the local construction industry’s exposure to global economic conditions and the continuing struggles of the Turkish lira have led to a slowing in building work.

The annual supply of new-build homes has dropped below the usual 1 million per year, said Konca — just as demand for those properties has rocketed.

“Demand for new builds is very high, while it is not that high for old apartments — the latter of which make up around 65 percent of the current supply of residential properties.”

Turkey’s macroeconomic position has exacerbated this problem. Interest rates are going up and banks are limiting the mortgage ratio they’re willing to lend at.

“It was around 75 percent of the property value, now it is around 10-20 percent,” said Konca.

In June 2023 mortgaged house sales were 66.8 percent down on the same month last year.

However, the country’s domestic market is less reliant on mortgages than many in Western Europe or North America, according to Tolga Ertukel, director of London-based real estate adviser Turkey Homes.

“Turkish banks’ interest rates have always been high and the entire mortgage structure in Turkey is still relatively new," he said.

"It doesn’t rely on the business of lending, with people instead relying on cash, loans from families, inheritances or other non-mortgage means.”

Turkey is not the only country reporting a drop in house sales, he pointed out.

“Inflation globally, from the US to the UK and Europe, is affecting people's buying power. This was a global effect, exacerbated by the Ukraine-Russia war,” he said.

Despite the overall decline in sales, Ertukel said his customers in Europe were still interested in property in Bodrum.

“Bodrum is the St Tropez of Turkey and it always sells.”