Deposit savings will be used for housing

NEWS FROM NECMİ ÇİÇEKÇİ – Last week we wrote about the assessment of the housing sector for 2023 and expectations for 2024. As you may recall, 2023 reflected the worst sales chart in the last 10 years for this sector. We said that 2024 is the “year of hope”. Based on this, we explained that construction costs will decrease, financing sources will increase, foam prices will melt, new projects will grow and the housing sector will put on its safe harbor jacket again. Last week, statements coming from the “financial sector” undermined our discourse. The banking sector said that the credit taps will be opened in 2024. On the other hand, it was stated that the central bank will abandon the “hawkish” policy strategy it has been pursuing since August in 2024, and the increase in interest rates will be replaced by a decrease after the second half of the year.


While sector representatives say that investors who abandoned rate-protected deposits (RCDs) due to high deposit yields are returning to banks, they say these savings will turn to the housing sector as interest rates fall in 2024. On the other hand, it is said that the banks will be more generous in providing loans and the deposits accumulated in the banks will be combined with these loans and converted into housing purchases. This process is interpreted as “the real estate sector will become more active and the prices of houses for sale will increase.” At this point, the saying we always say “The most profitable real estate investment is the earliest investment” becomes meaningful.


The housing sector representatives said that as financing needs are exceeded, the supply of new projects will increase and the backlog of purchase demand will be met, adding: “We will enter a period where sales will increase as credit requirements are met. This will answer the long-awaited ‘desire to own a house’. Business will grow as the sector recovers. In such a situation, it would not be wrong to say that the housing sector will appreciate. Prices are quite reasonable at the moment. If the expected financial meltdown occurs in 2024, housing prices will increase. Therefore, these days provide an opportunity for shopping,” he said.


In his statement on money markets in 2024, the manager of a private bank said the following: When central banks are confident of an improvement in the inflation outlook, they may start the process of reducing interest rates, especially in the second half of the year. In an environment where geopolitical risks are reduced and commodity prices are balanced, we expect the global economy to grow on an annual basis, although the possibility of a recession may occur quarterly. As conditions improve, so will global risk appetite. Interest rates will decrease in 2024. The economy will enter a normalization and growth trend.


Fluctuations in the post-pandemic economy triggered an inflationary environment. This has led to opportunism in some industries. Prices have risen significantly, especially in the automotive and housing sectors. At the moment, the government has announced a number of package measures. As a result of the controls, which lasted about a year, foam prices began to melt. Trade Minister Ömer Bolat made a statement on the measures taken, the current situation and the real estate sector. Ömer Bolat said that after the measures taken, the accommodation of opportunists was prevented.


Stating that checks will continue in 2024, Bolat said: “We have penalized the posting of false identity adverts in the real estate sector to inflate prices. We closely monitor advertisements on real estate websites. Fines are imposed on those who inflate prices. These penalties are not minor penalties and we will significantly increase them in the coming period. “We have entered other areas and increased controls in ready-mixed concrete, cement, building materials and markets,” he said.


In the period 2003-2022, 3 million 723 thousand 381 houses were produced in Turkey. Although housing production in the period 2013-2022 has approximately doubled compared to the previous 10-year period (2003-2012), it is noteworthy that it has not met the growing demand. Despite the growing population, Turkey’s home ownership rate is still around 60 percent. 40 percent of Turkey’s population lives on rent. Although there is such high potential, it is notable that housing production is far from meeting demand. Although the annual need for new apartments in Turkey is around one million, the average production of apartments in the last 10 years is below 750 thousand.


Deposit rates started to rise after the central bank raised the interest rate to 42.5 percent and said there was scope for further tightening. Changes in monetary and fiscal policy aimed at reducing inflation are increasing interest in the Turkish lira. According to the latest data, the interest rate on deposits with a maturity of up to three months has reached up to 55 percent in some banks. The fact that a deposit of 1 million lira provides a monthly return of up to 120 thousand lira brought deposit savings to a record level. In KKM, 400 billion TL was transferred to this field in 10 weeks. During this period, the accumulation of deposits in banks exceeded 8 trillion lire.


The manager of another private bank said the funding problem, which has been going on for the past two years, will enter the bailout phase in 2024.
It states that “there will be a sustained decline in inflation with a decline in domestic demand, a reduction in dollarization as instruments denominated in TL are considered investment instruments within the country, effective economic growth and a reduction in the current account deficit, export support.” With economic indicators improving in 2024, we may see confidence in the economy increase and capital flows begin depending on the state of global conditions. “This means an increased appetite for lending in the banking sector,” he said.

Leave a Comment