TODAY’S – SandP: Fed rate hike may hit Turkish housing sector

SandP: Fed rate hike may hit Turkish housing sectorA possible rate hike by the US Federal Reserve (Fed) would create an uncertain environment regarding prospects for foreign capital flows to Turkey, introducing risks to the forecast on the housing market, according to Standard Poorand#39s (SP) research released on Tuesday.andquotResidential property prices in Turkey rose strongly in 2014, gaining more than 16 percent in nominal terms.

Real price gains exceeded 7 percent, up from 6 percent recorded last year,andrdquo said the SP research with the headline andldquoHousing Markets in Israel, Russia, South Africa and Turkey Show Resilience to Weaker Economic Conditions.andrdquo andquotThe market softened temporarily in the first half of 2014 amid slowing economic growth and interest rate hikes, but rebounded strongly as monetary conditions loosened and confidence returned,andrdquo noted the SP in its research.

andquotWe forecast a continuation of nominal and real home price appreciation over the next two years. Funding conditions are likely to remain supportive for the housing market in the near term Overseas buyersand#39 interest in Turkish real estate will continue to support the market, but strong structural demand from Turkeyand#39s young and growing population will remain the key driver of housing market activity,andrdquo it added.

Economic and financial conditions in the first half of last year weighed on the Turkish housing market, the research pointed out, pushing the average mortgage interest rate to 13.6 percent in April 2014, up from 83 percent at the low point in June 2013, and mortgage lending growth started to decelerate.

Home price growth had slowed to 36 percent year-on-year in real terms by May 2014, compared with 6 percent in December 2013, the research said, pulling home sales down 10 percent in the first seven months of the year Mortgage interest rates had been trending down since April 2014, dropping to 10.8 percent by mid-February 2015, the research revealed, and lending for house purchases had picked up in autumn, although by December growth rates were still twice as low as in 2013, at 13.

5 percent, according to the research.andquotWe expect domestic demand to rebound in 2015, supported by more accommodative monetary conditions and a boost to real incomes due to falling headline inflation on the back of lower oil prices, supporting demand for residential properties this year,andrdquo the SP stated.

SOURCE: Today’s Zaman