Housing cycles

Dünya Executive - - FINANCIAL CORNER -

We know that American business cycles have been, or started out as, housing cycles. Because the American mortgage is typically of 30-years maturity – 22 years ‘effective duration’- it has affected everything since WWII.

Consider the REIDIN residentia­l property price index. It isn’t adjusted for quality, i.e. it is not a hedonic index. It is a more prima facie index that gives you raw data, so-to-speak. Istanbul and Turkey-composite have been almost juxtaposed until 2018. Now, İzmir is also down.

Istanbul has been dragging the whole Turkeycomp­osite index down, whereas İzmir, the latecomer to the game, did better until H2 2018.

Prices are down in real terms, sales are down, rents are down. Costs are still high although they have been down from the September 2018 peak of 47.5 percent annual rise peak to 27 percent.

Mortgage sales have been down again in

April. They are a bit better but there is no sign of a recovery yet.

Housing loan rates are still slightly over 20 percent.

New home sales are also down by 22.3 percent annually, as 3-month MA goes.

With the housing loan rates hovering around 20 percent, although the Turkish mortgage with 10 years maturity looks nothing like the American mortgage, there is no way the cycle redresses itself and heads north anytime soon.

Housing and automotive will probably recover last, if and when the worst is over.

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