Two key events recently have provided hope for economic relief and an upward turn to property prices in Istanbul, and Turkey:
1) President Trump (US) signalled the cancellation of sanctions on Turkey;
2) President Erdogan (Turkey) dismissed the head of the Turkish Central Bank, suggesting the new head will move interest rates in Turkey lower.
Are these events sufficient to move property prices higher?
The cancellation of sanctions would be positive for the economy, but the direct impact on property prices is likely to be less direct. The unfolding sanctions story is likely to be less clear, and less significant for property prices.
Lower interest rates would have a positive impact on property prices. With interest rates at 24%, mortgage lending has diminished, and any decline in interest rates will directly increase the amount of mortgage lending, and thus buying. As interest rates are currently at 24%, there is a long way to fall while this process unfolds, and property prices may begin to move higher in anticipation of further cuts.
Are these two events the solutions to projecting Turkish property prices on a sustainable uptrend? Neither of these two events provide the impetus to trigger a sustainable upward trend in Turkish property prices. Instead, there are two other factors that are key to triggering the structural changes required. One of these factors is very slowly adjusting in the right direction. The other factor is already underway, with policy measures introduced earlier this year, but the market has not recognised this, and is not yet anticipating higher prices as a result.
Our internal forecast is that prices may not begin an upward move until sometime between autumn and next spring, 2020, at the earliest. Recent policy announcements call for a decline in Turkish interest rates to single figures by year end 2019. Such a rapid decline would indeed trigger greater interest among property investors in Turkey, leading to higher prices. However the underlying structural changes will continue to be essential for supporting a sustainable long-term uptrend in property prices. For more information about what these two key factors are, and tracking their changes, and the effect on Turkish property prices, please email Advice@mytapu.com .
Investors wishing to participate in the declining interest rate environment in Turkey, by the purchase of property, may also like to consider alternative investments while they are finalising their property purchase (which may take as long as 90 days). These alternative investments will increase in TL value as interest rates decline, and result in a gain in the value of capital, that is designated thereafter for investment in real estate. These alternative investments include the purchase of Turkish Government Bonds. For additional information, please email Advice@mytapu.com.
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