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Turkey’s Housing Price Growth Spikes, Evoking Nouriel Roubini’s Concern over Meltdown

Nouriel Roubini

Turkey posted the second-highest house price growth in the world last year according to the 2014 Global House Price Index, which was recently published by real estate consultation firm Knight Frank, Pakistan’s APP said.

Housing prices in Turkey increased by an average of 14 percent in 2014, second only to Ireland where prices increased by 15 percent, according to the index.

Dubai, the U.K. and Estonia rounded out the top five spots. Turkey was sixth on the index last year, behind Dubai, China, Hong Kong, Taiwan and Indonesia, Today’s Zaman reported.

Prices have continued to rise in the Turkish housing market amid a sluggish year for sales. A major problem is that the majority of houses being built are too expensive for most Turkish customers to afford, according to a recent report from the Housing Developers and Investors Association, APP said.

The report says there is demand in Istanbul for 72, 000 homes built at a cost of TL 1, 263 per square meter, but supply in that price range is lacking. On the upper end, there is a demand for only 8, 000 homes costing more than TL 3, 000 per square meter, but over 63, 000 homes in that price range are being built, indicating a huge imbalance, according to APP.

Official data show that between 2002 and 2011, 520, 000 homes were built in Turkey.

This figure increased to as much as 800, 000 in 2013. There are currently over 1 million housing units for sale in Turkey. Speculation of a housing bubble spread through the markets when economist Nouriel Roubini last December cited Turkey as among the 18 countries whose housing markets are vulnerable to a possible meltdown, APP said.

Roubini correctly predicted the U.S. housing bubble and its collapse. He pointed to Turkey as one of the overheating housing markets. However, other analysts have downplayed the notion of an impending collapse. Housing sales dropped in Turkey through most of 2014 before recovering in the last quarter of the year, the report said.

Meanwhile, an article in The Motley Fool website quoted Roubini as saying that the U.S. is in an asset bubble again but it will not pop until 2016. However, the website claimed that Roubini has made numerous short-term predictions about the market and the odds of him getting things right are slim.

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