The newly announced housing project is tilting the balances in the property market, affecting demand, putting a break on the exorbitant price increases as millions of people are now applying for tens of thousands of homes to be built under the scheme.
Strong demand but insufficient supply pushed prices in the property market. But millions of people are now applying to buy a house from the newly announced social housing projects which puts a break on demand and lead to the bursting of the price bubble in the market.
Before the government stepped in to boost supply in the housing market, property owners would increase prices almost on a daily basis. Potential buyers are now holding back demand as the new project offer houses at more affordable prices and payment conditions.
“The housing market is stagnating due to restrictions imposed on loans coupled with the erosion in purchasing power and the newly announced social housing project,” said Hakan Akdoğan, head of TÜGEM, an association of real estate consultants.
Some 250,000 houses will be built in two years under what officials describe as the largest-ever housing project in the history of the country. Moreover, 100,000 land plots are put up for sale for people to develop their own houses on them. In five years, 500,000 houses will be built.
Separately, the Emlak REIT will launch another project,targeting middle and upper-middle income groups probably in October.
“Many people will apply for those houses and land plots. Those projects will tilt the balance toward homebuyers, they will have the upper hand in the property market,” Akdoğan said.
He acknowledged that prices have not yet declined but the pace of growth in prices is slowing. “For instance, a property owner’s asking price was 3.25 million Turkish Liras even though we told the client that the real worth of the property was 3 million liras. In the face of the weaker demand, this client is now willing to sell the property for 2.8 million liras,” Akdoğan explained. “They are becoming more realistic.”
Nizamettin Aşa, head of Istanbul Real Estate Agents’ Association, recalled that 4 million people applied to buy a house from the social housing project within a space of only six days.
“This means 4 million potential buyers are not now in the market. Potential buyers will turn to the government’s project, second-hand house sales will be affected. Demand is already weakening, and prices are falling.”
House sales declined by 12.7 percent year-on-year in August to 123,491 units, following a 12.9 percent drop in sales in July, data from the Turkish Statistical Institute (TÜİK) showed earlier this month. Experts attribute the decline in sales to exorbitant prices.
The residential property index soared 173.8 percent in July from a year ago, while the monthly increase was 8 percent, according to the Central Bank.