Goldman Sachs Predicts Significant Interest Rate Drop in Turkey: Implications for Real Estate Market

Revolte Consulting
29 January 2024

In a recent report by Goldman Sachs Group Inc., economists anticipate a notable shift in Turkey's central bank policy towards monetary easing. According to their projections, interest rates in Turkey could witness a substantial decline of up to 20 percentage points by the end of the year. This potential development holds significant implications for various sectors, including real estate.

Goldman Sachs analysts Clemens Grafe and Basak Edizgil suggest that as sequential inflation begins to decline sharply from the third quarter, policymakers are likely to implement rate cuts, bringing the benchmark rate down to 25% from its current 45%. This prediction stands out as the most conservative among forecasts compiled by Bloomberg.

In their report, Grafe and Edizgil state, "With inflation falling faster than markets are pricing, we think a mid-year start to the easing cycle would not be premature." This indicates a belief that the Turkish central bank may initiate the easing cycle sooner than anticipated.

The recent conclusion of an eight-step rate-hike cycle by the Turkish central bank, which quintupled rates since June, suggests a commitment to the current stance "as long as needed." However, policymakers hinted at a potential shift if there is a significant decline in the underlying trend of monthly inflation and price expectations align with their projections.

Goldman's perspective is rooted in their optimistic inflation forecast for Turkey, which is lower than the central bank's estimate of 36%. The Wall Street bank predicts that price growth will end the year at 30%, assuming the central bank's policy remains unchanged, and the growth in the money supply continues at its current sequential rate.

Moreover, Goldman anticipates a tightening of macroprudential policies to slow consumer lending, particularly in credit card products, a segment that has recently experienced accelerated lending. This move aligns with efforts to manage potential risks associated with the economic environment.

For the real estate market in Turkey, the potential decrease in interest rates can bring both opportunities and challenges. Lower interest rates generally make borrowing more affordable, potentially boosting demand for real estate. Homebuyers and investors may find it more attractive to enter the market, leading to increased transaction activity.

However, it's essential for stakeholders in the real estate sector to remain vigilant and adaptable. Changes in macroprudential policies, especially those targeting consumer lending in specific segments, could impact the financing landscape for real estate transactions. It becomes crucial for market participants to stay informed about evolving policies and their potential effects on the real estate market.

Goldman Sachs' forecast of a significant interest rate drop in Turkey presents a dynamic scenario with potential ramifications for various sectors, including real estate. Stakeholders in the real estate market should closely monitor developments, adapting strategies to capitalise on emerging opportunities while navigating potential challenges in the evolving economic landscape.

For more information and a personal consultancy on Real Estate market,contact  Revolte Consulting and let us be your guide on your next property purchase.


Interess rate change prvided by TurkStat & TCMB.

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