Macro and Politics

*Housing sales declined by 14.1% m/m and 7.8% y/y in November, falling to 141,100 units, indicating that the recovery observed in recent months lost momentum as of November. While cumulative housing sales over the Jan – Nov period increased by 13.3% y/y to 1,434,133 units, the latest data point to a weakening trend on the demand side toward the final quarter of the year. Moreover, mortgage-backed sales totaled 21,499 units in November, declining by 8.6% m/m and 1.4% y/y and this marked the first annual contraction in mortgage-backed sales since August 2024. The limited easing in housing loan rates continues to weigh on demand, with average mortgage rates edging down only marginally from 37.9% in October to 37.8% in November. Notably, despite mortgage rates standing at 41.2% in November last year, the pace of annual growth in mortgage-backed sales had already slowed to around 10% in October before turning negative in November. Looking at sub-components, first-hand home sales declined by 5.4% y/y to 46,589 units in November, while second-hand sales fell by 8.9% y/y to 94,511 units. Housing sales to foreigners also weakened, decreasing by 9.7% y/y to 1,943 units. Taken together, headline figures, developments in mortgage rates and seasonally adjusted indicators suggest that housing demand has entered a noticeable weakening phase toward the end of the year.

* The Residential Property Price Index (RPPI) increased by 2.7% m/m and 31.4% y/y in November, reaching 204.2, while real house prices recorded a 0.3% annual increase. As a result, the annual real change in RPPI turned positive for the first time since January 2024. This indicates that, despite the weakening observed in housing sales in November, supply constraints and cost-driven price rigidities continue to prevail. Accordingly, given the current level of interest rates and the demand outlook, the recent improvement in real property prices is likely to remain limited and fragile in the near term.

* The Treasury tapped the domestic markets at an amount of TL6.7bn (including non-competitive sales) via yesterday’s 5Y CPI-indexed bond auction, while also sold TL15.1bn at the direct sale of TLREFK Indexed lease certificate. With yesterday’s auction and direct sale, the Treasury has completed its domestic borrowing program for December, raising TL119.7bn in total - below the initial projection of TL124.2bn. The Treasury’s next 3-month domestic borrowing strategy (Jan – Mar 2026) will be announced on December 31, at 17:30 local time. In the previous borrowing strategy, the Treasury had projected total domestic borrowing of TL542.6bn against its redemption amounting to TL606.4bn for January.