Mortgage Squeeze Shakes Housing Market: July Mortgaged Sales Ratio Stagnates at 18.1%

The persistent pressure of high interest rates on the Turkish housing market continues to stifle credit-backed home purchases, with the share of mortgaged sales settling at 18.1% in July. Strict monetary policies and elevated mortgage rates are steering prospective buyers away from traditional bank loans toward alternative financing models and cash transactions. Concurrently, real declines in property prices are carving out selective entry points for cash-rich investors looking to capitalize on market corrections.

Mortgage Market Constrained by High-Interest Rate Wall

Elevated borrowing costs have effectively sidelined middle-income buyers, keeping the share of mortgaged transactions well below historical benchmarks:

■Mortgaged transactions accounted for just 18.1% of total home sales in July.

■The remaining 81.9% of transactions were executed via cash payments, promissory notes, and developer-backed in-house installment plans.

■This credit squeeze coincides with the seventh consecutive month of real price declines in the housing sector, eroding real estate's traditional hedge against inflation.

The Reign of Cash and the Rise of Developer Financing

With bank financing largely out of reach, property developers are increasingly stepping in to act as quasi-financial institutions to sustain sales volumes:

■Rising deposits and high yields in the banking sector continue to divert capital away from real estate and into risk-free financial instruments.

■To counter the slump in bank-financed purchases, developers are aggressively rolling out in-house financing schemes, offering interest-free payment terms of up to 60 months.

■Despite the tight credit environment, July recorded the "highest monthly sales of the year," indicating that pent-up demand is being unlocked primarily through cash reserves and developer incentives.

The stagnation of mortgaged sales at 18.1% underscores the systemic disintermediation of the banking sector in housing finance. Under current interest rate dynamics, utilizing bank credit for home purchases has ceased to be a rational financial decision for most. However, the ongoing correction in real prices, combined with highly attractive developer campaigns, keeps the market liquid for cash-rich investors. Until a rate-cutting cycle formally begins, the primary engine of the market will remain developer-backed financing and liquidity rather than bank mortgages. — Murat Yıldız, Real Estate Development, Investment and Valuation Specialist