31 August 2014
Housing stock continues to rise amid slow sales, rising prices
Due to heightened political tension, high interest rates and sluggish markets, the constructor sector — once considered Turkey’s economic engine — is threatening to derail and is projected to have a level of stock sufficient for an entire year, even if no new homes are built, according to a report in the Taraf daily on Sunday.
According to the report, unpurchased housing stock has reached the 1 million mark. The number is expected to rise alongside the continuation of urban transformation projects and projects involving the development of 2b land, which refers to areas previously considered forestland.
However, a decline in sales has coincided with accelerating prices, particularly due to high interest rates. During the first seven months of 2014, 609,000 homes were sold in Turkey, marking a 9.7 percent year-on-year drop, according to figures from the Turkish Statistics Institute (TurkStat). Furthermore, sales in July reached the 85,000 mark, although this accounted for a 20 percent decline year-on-year.
In spite of these discouraging figures, construction companies are preparing to announce the completion of a number of mega projects that will be unveiled in September, according to the report.
As mortgage interest rates continue to rise, applications for housing loans have dwindled. In 2013, housing loan use shot up 20.4 percent year-on-year, but fell 5.6 percent during the same period of this year. Meanwhile, housing prices in Turkey’s largest city of İstanbul rose 21.59 percent in July year-on-year, according to real estate market analyst Reidin.
This has negatively impacted employment rates in the construction sector, as the construction sector employment index decreased 10.8 percent during the second quarter of this year compared to the second quarter of 2013. Wages in the sector have also declined slightly.
The gloomy picture for Turkey’s construction market has created fears that the industry’s bubble will burst. Rapid construction over the past decade has largely fueled the country’s economic upswing.