Discounts worked but home sales still stagnant
In mid-May, two basic measures were implemented to stimulate home sales. Public banks, and many private banks, lowered their mortgage interest rates below one percent. In addition, price reductions were made on major housing projects. We began to see the effects of these measures in May because the decisions were only implemented in mid-May.
Interest and price reductions showed their main effects in June. Total housing sales in the current year increased by 22 percent compared to the same month last year. Here are the developments in home sales:
►We always emphasize that “first sales are important in home sales.” First time buyers should increase in order to get rid of the housing stock, because other sales do not contribute to the economy. First sales increased by 26 percent in June. Despite this increase, we see that the six-month increase was only 0.9 percent. This shows how first sales in the previous months made no progress, or even declined.
►Mortgage sales have been declining significantly over the previous months. In June, there was a very high increase of 35 percent in mortgage sales. Moreover, first time mortgage sales increased by 42 percent. Thus, when people think that the interest rate is low and will not fall further they will buy new housing. It also appears that a loan interest rate of around 1.5 percent will likely hurt sales.
►Although sales in June showed a rapid increase, the sale of 646,000 units in six months was not high compared to previous years. First of all, we are still below last year’s figures. When we look at the average of H1 of the previous three years - 2015, 2016 and 2017 - it is 640,000. So we are actually making no headway.
►As the discount on credit interest is over, it is clear that July sales will fall to the normal level. In addition, the high level of sales in June this year seems to be because of very low sales in June last year. However, sales increased after July last year. So we will no longer see a base effect increase. A high level of sales will not take place because the discount on credit interest is over and last year’s sales were high.
►Home sales increased to 1.4 million annually as of June. But we have failed to exceed 1.4 million for the first time; total sales last year were 1.409 million. This is another piece of datum that shows sales are not so dynamic as to become a general trend.