Page 11 - TURKRptSept19

13,000 people in Turkey applied to three public banks for housing loans worth a combined TRY2.1bn (€340mn) within the space of two days following rate cuts, according to a joint statement from state-owned lenders Ziraat, Vakif and Halkbank put out on August 6. There are a total of 1.5mn-2mn unsold homes in Turkey, according to sector representatives.
Data from the banking sector watchdog BDDK showed that housing loans extended by local lenders declined by 11% on an annual basis to TRY179bn at the end of July. The housing loans volume stood at a record TRY201bn in July last year but declined to TRY189bn by the end of 2018.
In June this year, house sales plunged 40% y/y to 61,355 units. Mortgage- financed sales completely collapsed, declining 85% y/y to 7,320 units.
In the first half of the year, the local housing market contracted 22%
compared to the same period of last year.
Business and consumer sentiment remains weak. The economic confidence index dived 3.3% on a monthly basis in July, the country’s statistics authority reported. Consumer confidence declined 2% m/m and business sentiment fell 3% m/m in the month.
The Turkish lira has become the Teflon lira of late with nothing knocking it off a surge up the tracks. Not geopolitical and defence rows with the US— Donald Trump has proved a handy pal with his great reluctance to hit the Erdogan administration with sanctions—and not President Recep Tayyip Erdogan’s July firing of the central bank governor by presidential decree, leaving the idea that the national lender still retains monetary policy independence as for the birds. The debate as to how unreliable Turkey’s inflation figures have become in the hands of pressured officials and just how much manipulation of the Turkish lira (TRY) is taking place behind the scenes on the instruction of the Treasury goes on. But in the meantime, since May when it hit an eight-month low, the lira got lucky. By the morning of August 7, it had climbed more than 10% from that trough to better than 5.49 against the USD.
“Lira on the train tracks”. However, as a long-time foreign investor told Reuters on August 6: “There are vulnerabilities around every corner. It’s hard to avoid the sensation that we come into work every morning to pick up lira on the train tracks.”
Erdogan’s under pressure. Turkey’s $766bn economy—expected to contract this year—got hit by a bitter recession in the wake of the currency crisis of last summer and then the president, a strongman once thought just about invincible, saw his man lose the Istanbul election as well as the controversial ‘revote’ that followed. But the lira is way out ahead of any other emerging currency so far this quarter. And Turkey’s bond returns have been transformed. They were among the worst earlier this year, now they are among the best. since the Erdogan revote loss on June 23, Turkish bonds have returned 4.2%, the second best in JP Morgan's EMBI emerging markets index.
Turks, however, are not yet buying the recovery story. A year-long trend of “dollarisation” has not abated, noted Reuters, with a near-record 53% of accounts holding foreign currencies in mid-July. Rating agency S&P, meanwhile, observed that just 11% of government bonds are now held by foreigners. “The fate of the Turkish lira relies far more on the sentiment of Turkish resident households,” it said. What’s more, key drivers of the Turkish economy such as the construction and energy industries, are up to their necks in unrepayable debt. Finding a way out of the woods for these sectors is proving a mighty headache, with rows starting to kindle over how much of a bailout the private sector should be entitled to expect from the government.
11 TURKEY Country Report September 2019 www.intellinews.com