Turkey’s new measures not enough to tackle soaring property prices, builders say

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View of residential areas on the Asian side of Istanbul, Turkey April 12, 2022. Picture taken April 12, 2022. REUTERS/Dilara Senkaya

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ISTANBUL, May 11 (Reuters) – Turkish builders say new government programs to support the property sector will boost home sales, but will not be enough to cope with soaring property prices that have jumped nearly 100% per year.

President Tayyip Erdogan on Monday announced three separate loan programs to deal with soaring property prices as residents struggle to find affordable homes to rent or buy after last year’s currency crisis. Read more

One measure was a package of loans given to construction companies to complete unfinished projects on the condition that they undertake to keep the selling prices of their homes unchanged for a year.

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Entrepreneurs say the schemes, which also include cheap mortgages, will help boost home sales by around 20%, but will do little to halt rising house prices in the near term.

Builders cite rising input costs, the depreciation of the pound as well as weak supply in the housing market as reasons for the price spike.

Sefer Altioglu, a board member of homebuilder Mint, said construction costs were rising 10% per month, which was then expected to affect house prices.

“If I have eight months left to complete my project, that means a cost increase of more than 80%. Why should I bear this cost and keep prices stable to get a cheap loan? said Altioglu.

The construction index climbed 102% year-on-year in March, according to data from the Turkish Statistical Institute.

The house price index also jumped 96% a year in February, according to the latest central bank data. In Istanbul, the index climbed 106% over the year. Read more

Altioglu said companies are unwilling to start new projects due to “unpredictable” costs, as well as uncertainty over their ability to sell the homes as Turkish purchasing power deteriorates with rampant inflation 70% in April.

Erdogan said the loan program for construction companies aims to increase the supply of housing, thereby bringing prices back into balance. He said the cheap loans would also help Turks buy new homes.

Ibrahim Babacan, chairman of homebuilder Babacan Holding, said the government should also support new projects and not just incomplete projects to further increase supply.

He said home sales would increase by 20-25% thanks to cheap loans, but the measures do not provide a solution to soaring home prices.

“The 0.99% home loan is so attractive in a country with an annual inflation rate of 70%. No doubt buyers will take advantage of it,” he said.

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Reporting by Ceyda Caglayan; edited by Frank Jack Daniel

Our standards: The Thomson Reuters Trust Principles.

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