Housing – Is it logical to buy a house now?

Housing – Is it logical to buy a house now?

According to Maslow’s Hierarchy of Needs we can divide our need in 3 main categories: 1) Basic needs, 2) Psychological needs and 3) Self-fulfillment needs. Basic needs are ones without which we cannot survive on this world. In the bottom line there are biological and physiological needs that can be described as air, food, drink, shelter, warmth, sexuality, sleep, etc. On top of this layer there are safety needs which can be summed up as protection from elements, security, order, law, stability, freedom from fear, etc.

Those first two layers are the ones we will be focusing in this article. After a full stomach each creature will look for a shelter which can be called house for human beings. It is very important for us to understand the big picture first. Among OECD countries in 2Q2017 which is the latest full data available list (only excluding New Zealand), the leader in Residential Property Price Indices (RPPIs) is Turkey. From 4Q2014 till today Turkey continues to lead the OECD nations in RPPIs. In 3Q2014 the leader was Estonia.

It is such a pity that Turkey’s per capita income isn’t on top of OECD list. That means Turkish citizens won’t be able to afford buying house as easy as a Portuguese or a Slovenian. From the graph below we can clearly distinguish Turkey from other OECD countries and those are the ones with higher scores.

In the light of this information we will dig deep into Turkey. In first 11 months top three cities are Istanbul, Ankara and Izmir respectfully. It is shown in the table below that 5 cities are combining almost 40-60% of total house sales in Turkey. But it is promising that their share in Total sales are diminishing (from 59.1% in 2008 to 42.6% in 2016). There are other cities in Turkey which can be used for construction purposes because population is not increasing in only top 5 cities. Other cities also need to be renovated. Turkey is considered to be an earthquake-prone country and must be prepare itself for this natural disaster.

	% in Total House Sales
	İstanbul	Ankara	İzmir	Antalya	Bursa	Türkiye
2008	24%	20%	6%	6%	2%	100%
2009	25%	19%	6%	6%	3%	100%
2010	25%	17%	7%	5%	3%	100%
2011	24%	17%	6%	5%	3%	100%
2012	24%	15%	7%	5%	4%	100%
2013	20%	12%	6%	5%	4%	100%
2014	19%	11%	6%	5%	4%	100%
2015	19%	11%	6%	5%	4%	100%
2016	17%	11%	6%	5%	4%	100%

 

If there is a need for housing people must have defined their priority very clear. If someone is eager to buy a house but won’t have enough money, mortgage system could reach out for him/her help. From January 2013 to November 2017 approximately average 35% of home buyers have used mortgage loans. From the graph below we can identify a certain pattern for homebuyers: They prefer autumn season for buying a new home. This could be described as high season for real estate agencies and banks.

If we look at consumer loans on monthly basis for banking sector we must observe the same pattern but we can’t. The main reason for it could be rising interest rates which directly affect consumer behaviour. Also political and economic status are not showing any sign of confidence for domestic environment, too.

As a conclusion, Turkey’s house prices are higher than all OECD countries and most of Turkish citizen try to take other steps than mortgage loan if they are considering to buy a house. As a result of unstable economic and political environment interest rates are not going to be lower in near term. These 3 main reasons must be guide someone's opinion of buying or not buying a house in these days.