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Türkiye’s housing market continued to cool in real terms in September, extending a 20-month streak of inflation-adjusted declines as tight monetary policy and a rise in public housing supply helped rein in price growth.
According to the Central Bank of the Republic of Türkiye (CBRT), the Residential Property Price Index (RPPI) – which tracks price changes for homes nationwide, adjusted for quality differences – rose 1.7% month-over-month in September to 195.7 points.
On an annual basis, house prices increased 32.2% in nominal terms. But after adjusting for inflation, they fell 0.8%, marking the 20th consecutive month of real declines.
The last time housing prices posted a real annual gain was in January 2024, when they rose 1.4%. A month later, they began to fall in real terms, dropping 5.1% in February. The sharpest annual decline was recorded in May 2024, when real prices fell 14.9%.
Demand for residential properties in Türkiye remains strong, despite a tight monetary policy that has kept borrowing costs high since mid-2023 to curb inflation.
According to data from the Turkish Statistical Institute (TurkStat), 150,657 homes were sold in September – the highest September figure on record.
That took the January-September total to 1.13 million units, a 19.2% increase from a year ago. Last month’s mortgaged sales rose 34.4% to 21,266 units, while the nine-month total increased by 76% to 162,493.
Türkiye’s inflation rate in September came in higher than expected at 33.3%, marking the first annual rise since a peak of 75.4% in May last year.
That is expected to make the country’s central bank slow the pace of its interest rate cuts when its policymakers meet on Thursday, according to surveys.
Tight monetary policy, housing supply
Professor Şener Şener of Istanbul University says the decline in real house prices since February 2024 has been impacted by the government’s medium-term economic program and the central bank’s tight monetary policy.
The increase in housing supply, particularly through state-backed projects, has also helped keep prices rising more slowly than inflation, Şener said.
The record sales volume in September signaled strong underlying demand, according to the professor.
“This shows that the government’s efforts have found a response on the demand side, and purchases have reached a certain level. In other words, the fact that demand is being met to some extent has prevented prices from rising rapidly,” he noted.
Şener recalled that prices surged sharply after the devastating earthquakes that struck southeastern Türkiye in early 2023 and during the COVID-19 pandemic, as supply tightened and costs rose.
“Rapid measures, especially the construction and delivery of large numbers of new homes in the quake-hit provinces, helped curb the price bubble,” he said.
“In major cities, both rental and housing price pressures have relatively eased. At the same time, the disinflation process and high housing loan rates have restrained potential demand.”
Şener cautioned that lower inflation could revive price pressures if mortgage rates start to fall.
“If housing finance costs decline along with inflation, this downward trend could reverse. To prevent another sharp rise, the private sector and developers must continue expanding supply alongside state efforts,” he said.
The central bank lowered its benchmark one-week repo rate by 250 and 300 basis points in September and July, respectively.
Economists expect it to deliver a 100 basis-point cut this week to 39.5%.
The CBRT estimates inflation will drop to about 24% by the end of the year, with a forecast range of 25%-29%. The government’s newly updated medium-term program expects it to slow to 28.5% this year.
According to real estate economist Ahmet Büyükduman, last year’s double-digit real declines in home prices have now moderated, with price changes moving closer to headline inflation.
“Given signs of stronger housing demand, there’s an expectation that prices may soon move slightly above inflation again. For those buying homes for personal use, it’s actually a favorable time,” Büyükduman said.
