– Date of update:
Editor: Zeliha Mangırcıoğlu / Source: Türkiye Newspaper
NEWS FROM NECMİ ÇİÇEKÇİ – Real estate, the locomotive sector of the Turkish economy, is experiencing the most difficult period in the last 10 years. The sector, which last recorded sales figures of 1 million 157 thousand units in 2013, should close at 1 million 200 thousand this year. There are many reasons for this bad situation. First, the February earthquake deeply wounded our entire country. The real estate sector was negatively affected by this process. Both the reconstruction of the destroyed cities and the migration process caused by the earthquake disaster we experienced directly or indirectly affected all economic activities, especially the construction industry. The general election held in May raised concerns among investors. Homebuyers have started to take a “wait and see” approach. The rise in interest rates after the election caused a decline in housing purchases. As the banks turned off the credit taps, the sales curve turned downward. The citizenship permit for foreign buyers has been reduced to $400,000. On the other hand, opposition xenophobia scared investors. When high inflation increased construction costs, there was a supply shortage in the industry. This whole process has caused real estate to lose blood.
YOU SHOULD NOT DARK THE NECK
So what awaits the housing sector in 2024? First of all, it is worth noting that 2024 will not be as bad as 2023. Positive developments in the economy are promising. A “campaign for loans with affordable payment terms” that the government plans to announce will be crucial to boosting sales. We are entering a year in which construction costs will decrease, foam prices will begin to melt, public and private sector campaigns will increase sales, and government measures will bear fruit. In addition, housing’s status as a safe harbor will be strengthened. In short, we look forward to 2024 with greater hope, without fear.
PUBLIC OFFERING WIND IN REAL ESTATE
2023 was the year of the IPO. The number of companies listed on Borsa Istanbul reached 53. These companies made a total supply of more than 70 billion liras. 9 of the 53 companies were REITs. In fact, the largest IPO in 2023 was by a real estate company. Investors have shown great interest in these real estate companies. Demand far exceeded supply. Well-established companies in this sector will continue to go public in 2024. Even though sales in the sector have stalled, the big players will continue to invest and bring profit to their investors with their strong and well-established capital structures.
OPTIMISTIC EXPECTATIONS ON THE SALES CHART
According to data from the Turkish Statistical Institute (TUIK), residential sales decreased by 20.6 percent in November compared to the same period of the previous year, reaching 93 thousand 514. Between January and November, residential sales decreased by 14.9 percent compared to during the same period of the previous year and reached 1 million 87 thousand 349. Industry representatives expect that the total sales at the end of the year will be in the range of 1 million 200 thousand. When we consider the numbers, the last time we saw the 1 million 200k band was in 2013 with 1 million 157k. In short, the sector will achieve the worst sales in the last 10 years. The expectations of industry representatives for 2024 are more positive. It is estimated that sales in 2024 will move the range of 1 million 400 thousand.
LAND, FIELD AND COMMERCIAL SHARE TO MOVE TO RESIDENTIAL
The decline in apartment sales this year stimulated non-residential real estate. Sales of land, fields and commercial real estate reached an all-time high with 1 million 426 thousand 146 units in the first 10 months of the year. In the same period last year, it was 1 million 391 thousand 787. The rate of increase was 2.5 percent. Despite the decline in apartments, the increase in other types of real estate attracted attention. Based on the period January-October, the number of sales of land, fields and commercial real estate was 1 million 176 thousand in 2021, 1 million 17 thousand in 2020, 828 thousand in 2019 and 1 million 14 thousand in 2018. Share of non-residential real estate in total sales reached 58.9 percent for the first time. The increase in housing purchases in the new year creates expectations of a decline in the non-residential segment.
INCREASE IN PURCHASING POWER WILL SUPPORT THE INDUSTRY
It is possible that as minimum wages and pensions rise, purchasing power will increase. The central bank’s inflation and exchange rate expectations for 2024 are also positive. For this reason, interest in the real estate sector is estimated to grow both for investment and housing. Industry representatives share the same opinion. 2024 will be the year when new projects in metropolitan cities gain momentum.
IT WILL BE A YEAR IN WHICH THE SUPPLY OF NEW PROJECTS WILL INCREASE
In Turkey, the need to produce apartments is 900 thousand to 1 million units every year. However, this number barely reaches the level of 650 thousand per year. The biggest problem in the production of projects is the rapid increase in input costs. 2024 will be the year in which the growth of input costs for construction slows down. New projects will be created with financial support. Sector representatives use these statements in their 2024 statements: We estimate that the central bank’s hawkish stance will ease somewhat from the second half of the year. A sharp increase in interest rates will be replaced by inaction. New campaigns announced for this sector by both the private sector and the government will increase revenue. The revenues of large real estate companies from public offers will be a source of financing for new project investments. It is a correct approach to say that 2024 will be the year of the project.
HOUSING PRICES PROTECT THEIR VALUE
In general, property prices are not expected to fall. In the last 4 months there has been a decrease in rental prices. However, this froth is caused by melting prices. On the selling side, no decline in prices is observed. This will continue in 2024. Because there is a pending purchase request. Credit campaigns will melt this purchase demand. We will enter a period in which savings accumulated in the stock market and bank deposits will be transferred to housing. This will lead to an increase in housing prices. Housing will increase its attractiveness in terms of investment. Therefore, buying a house early will always be a profitable investment.
WILL ISTANBUL BE MORE EXPENSIVE THAN MANHATTAN?
Central Bank Governor Hafize Gaye Erkan touched on housing prices for rent and sale in her recent statement. Stating that prices are high but will start to fall in 2024, Erkan said: “Will houses in Istanbul be more expensive than Manhattan? We could not find a house in Istanbul. It’s terribly expensive. “We settled in with my parents and we’re staying with them,” he said.