ANALYSIS: Why Are Turkey’s Home Sales Soaring Despite Sky-High Prices and Looming Rate Cuts?

Summary:

Turkey’s housing market remains astonishingly resilient. In September 2025, home sales rose 6.9% year-on-year to 150,657 units, defying gravity in the face of record-high prices, stubborn inflation, and elevated borrowing costs. Mortgage-backed transactions jumped 34.4%, while total sales in the first nine months of the year climbed 19.2%. Analysts say the surge is driven by domestic buyers using real estate as an inflation hedge, renters escaping an unsustainable leasing market, and a structural housing shortage that keeps demand alive even as affordability erodes.

Home Sales Defy Gravity

According to data compiled by İş Yatırım, Turkey’s housing market extended its winning streak in September.

• Total home sales: 150,657 units (+6.9% YoY, +5.1% MoM)

• Mortgage sales: 21,266 units (+34.4% YoY, +7.9% MoM)

• First-hand sales: +5% YoY, +7.3% MoM

• Foreign sales: down 7.7% YoY to 1,867 units, though up 3.1% MoM

Russian nationals led foreign buyers with 267 transactions, followed by Iraq and Iran.
In the first nine months of 2025, total housing sales reached 1.13 million units, marking a 19.2% annual increase. Mortgage-financed sales soared 76%, while foreign demand fell 12.6% over the same period.

1. Inflation Hedge and the Store-of-Value Effect

Turkey’s sky-high inflation—officially around 33%, but perceived closer to 50%—has transformed real estate into the ultimate store of value.

Many households now view property not just as shelter, but as a financial instrument. The erosion of the Turkish lira’s purchasing power has made cash holdings unviable: TL deposits yielded about 45%, while gold returned 80% in TL terms this year. According to a recent CBRT blog post, Turkish savers have a “short-term savings horizon” — when perceived inflation spikes, financial assets are quickly converted into real ones.

Despite nominal home prices rising roughly 30% per year, inflation-adjusted (“real”) prices have actually fallen in many regions, creating a psychological affordability illusion. In other words, homes feel cheaper when everything else is getting more expensive faster.

2. The Rental Market Crisis: No Excuses Left Not to Buy

Turkey’s rental market is in meltdown. Average rents in Istanbul and other major cities have surged at double or triple the official inflation rate, making long-term renting economically irrational.

For many middle-income families, mortgage payments now rival rent levels, turning ownership into a form of forced saving. This has triggered a behavioral shift where even high mortgage rates are tolerated because rent is seen as “dead money.”

This shift is clearly visible in the 70% surge in mortgage-financed home sales, as buyers take advantage of perceived negative real interest rates — believing inflation will outpace loan costs.

3. Structural Demand and Supply Shortages

Beyond short-term psychology, Turkey’s demographics and urbanization trends sustain long-term demand. With a median age of 33 and ongoing urban migration, demand for new homes remains structurally strong.

Meanwhile, construction activity—though rebounding—lags behind population growth and replacement needs, keeping supply tight. Rising land and input costs further constrain new development, especially in metropolitan areas.

Policy Contradictions and Domestic Demand Myths

The ongoing housing boom raises a key contradiction in economic policy. The Central Bank insists that domestic demand is “rebalancing”, helping disinflation. Yet surging property transactions directly contradict that narrative.

Housing is typically the largest single household purchase and serves as the clearest signal of consumer confidence. The record pace of home buying, therefore, suggests domestic demand remains far stronger than the official rhetoric admits.

4. What Lies Ahead: Two Conflicting Forces

The housing market’s next chapter will depend on which of two opposing dynamics prevails:

• Rising Supply from Public Projects:
  Massive reconstruction in Hatay and nearby earthquake zones is bringing new units to market. President Recep Tayyip Erdoğan has pledged to build 500,000 subsidized homes for low-income families in 2026. If financing—estimated at $20 billion—can be secured, these rental units could ease pressure on prices.

• Rate-Cut-Driven Demand Surge:
  On the other hand, the market expects the CBRT to deliver 300 basis points of rate cuts across its October and December meetings, likely triggering a new wave of refinancing and speculative buying in anticipation of cheaper loans.

If both forces collide, the short-term effect may be another burst of demand before a gradual cooling in 2026.

Conclusion: A Market Running on Psychology

Turkey’s property market continues to defy conventional logic. Inflation anxiety, wealth preservation instincts, and rent fatigue keep buyers in play—even as affordability collapses. For now, housing remains the ultimate inflation hedge and a mirror of public sentiment in a country where economic policy is shifting, but inflation psychology is not.

By Atilla Yeşilada
Sources: İş Yatırım, Turkish press reports

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