The real decrease in housing prices has been ongoing for 8 months, yet investors who see this as an opportunity continue to purchase houses despite high interest rates.

The Housing Price Index (HPI/2023=100), calculated by the Central Bank of the Republic of Turkey to track quality-adjusted housing price changes in Turkey, rose by 1 percent in September compared to the previous month, reaching 148. The HPI increased by 27.4 percent annually in September, with the real decrease during this period being 14.7 percent. This means that the real decrease process that started in February continued into the 8th month. Housing prices had last increased by 1.4 percent annually in real terms in January. After starting to decline in February, the 5.1 percent real decrease continued until last month. In September, the annual real value loss in housing prices rose to 14.7 percent, and with investors seizing the opportunity, last month saw the highest housing sales figure in the last 21 months, with 140,919 units sold. “DIVERSIFICATION OF PORTFOLIOS AND REAL DECREASES IN PRICES INCREASED SALES” Real estate economist Ahmet Büyükduman stated that as long as a real interest rate above inflation is maintained, the decrease in housing prices will continue. Büyükduman, emphasizing that the real decrease in housing prices is an opportunity for investors, made the following assessments: “Already, gross rent multiples have dropped to around 15 years. The average amortization period for houses had risen to over 20 years. This figure is now back to around 15 years. We are back to the rent/price ratio from 20 years ago. Rents show a very favorable rate compared to housing prices. Therefore, we can say ‘there is an investment opportunity in real estate.’

In September, the highest sales figures in the last 21 months came as a result of this. The diversification of portfolios by investors who benefited more from gold, returning from Foreign Exchange Protected Turkish Lira Deposits and Participation Accounts, and thinking ‘interest rates could fall and housing prices could rise,’ increased sales. The diversification of portfolios together with the real price decreases was effective in increasing housing sales.” Büyükduman stated that housing sales have been increasing for the past 3 months, adding, “We see that those who want to make purchases aimed at rental income are also turning towards buying houses. Housing has regained appeal at the current rent multiplier levels.” “IT WILL NOT BE A SURPRISE FOR REAL HOUSING PRICES TO DECREASE FURTHER FOR SOME TIME” Sefer Şener, a Faculty Member at Istanbul University Faculty of Economics, stated that there has been a contraction in housing supply worldwide due to the Covid-19 pandemic, emphasizing that rapid contraction in housing supply has resulted in a rapid increase in housing prices and rents, which has put significant pressure on inflation. Explaining that in recent period, following the earthquakes centered in Kahramanmaraş, houses began to be rapidly constructed and delivered in affected provinces, leading to a cap on rents not long ago, and after the rapid increase in interest rates with the new economic program, demand for housing has decreased, Şener said: “With the addition of an increase in housing supply to this situation, the increase in prices has slowed down. The retreat in prices shows that it is the right time to buy property with savings made in advance. However, the decline sought for mortgage housing purchase has not yet reached the desired level. Because both costs and the excessive demand and inadequate supply have caused housing prices to remain quite high worldwide. The pandemic, costs, earthquakes, and inadequate supply have brought about an excessive increase in housing prices. Therefore, with the increase in supply and the slowdown in inflation, it will not be a surprise for real housing prices to decrease further for some time.” “INVESTORS SHOULD READ THE MARKET UPS AND DOWNS CORRECTLY”

Neşecan Çekici, President of the Association of Real Estate Investors (AYGODER), pointed out that one year ago, following the negative real interest rate policy implemented in the recent period, housing loan interest rates had significantly decreased, resulting in investors turning back to buying houses. This trend continued to grow and an extraordinary increase of around 170 percent annually in housing prices was observed in 2022. Housing sales fell below the threshold of 1.5 million units on an annual basis in the years 2020-2022. In 2023, housing sales decreased. The low trajectory in sales has indeed led to a real decline in housing prices. Currently, low housing sales numbers are associated with difficulties in accessing finance and purchasing power issues. It is anticipated that as these difficulties decrease or disappear altogether, interest in real estate investments will increase again, exerting upward pressure on housing prices.” Emphasizing that real estate has always been one of the most preferred investment tools in Turkey, Çekici stated, “Housing investments are not only seen as meeting the need for housing but also as a savings product, life insurance, and a financial investment instrument. When investing in this area, it is important to be conscious. By reading the market ups and downs correctly and making investment decisions within the most appropriate timing and market conditions, gains will be generated in the long run.”