Main opposition warns against alarming mortgage increases

ISTANBUL

DAILY NEWS Photo

The excessive rise in housing prices in Istanbul despite a property boom concerns sector representatives, who warn against a real estate crisis that may spill over to other cities, a new Economic Outlook report released by the main opposition party has said.

The monthly report prepared by the Republican People’s Party (CHP) using official figures unveil that housing prices have reached alarming levels, requiring immediate action from policymakers.

According to the monthly housing price index recently announced by the Central Bank, housing prices surged by 1.27 percent across Turkey over May, while consumer inflation was 0.4 percent, the report says.

“In other words, the increase in housing prices tripled the general prices,” the report read.

In May, the biggest rise in housing prices was in the northwestern provinces of Balıkesir and Çanakkale, where the prices of houses increased by 2 percent.

However, when looked at on an annual basis, Istanbul, Turkey’s most populous city that houses more than 14 million people, has had the highest real estate price surge. The housing prices in the city have jumped by 20.5 percent over the past year.

The most remarkable price increase has been witnessed in Istanbul over the three-and-a-half year period as well, according to the report.

While the housing prices in Turkey jumped to 155 from 100 over the period, the prices in Istanbul surged to 175 from 100. Inflation-adjusted (real) price increases, meanwhile, were 15 percent for the whole of Turkey and 28 percent for Istanbul.

The report also highlights that housing price increases in Ankara and İzmir, the second and third largest provinces in the country, are remarkable as well, despite remaining moderate compared to Istanbul.

“It is well-known that there is a serious house surplus in Istanbul as sector representatives keep saying. The continuing increase of housing prices in real terms despite this is very concerning,” the report read.

The reports argued that the figures suggest the prices in Istanbul are on the verge of rebalancing with the explosion of the real estate bubble in Istanbul.

“It wouldn’t be a prophecy to say that a real estate crisis triggered by the burst of the housing bubble in Istanbul would spread to the whole of Turkey,” it stressed.

The CHP report claims the ruling Justice and Development Party’s (AKP) pressure for lower interest rates is also mostly stemmed from the critical condition of the housing bubble in the country.

“The AKP government is trying to pump more air into the balloon to prevent it from bursting ahead of the 2015 [general] elections,” the report stated.

However, the report further says, the biggest obstacles in front of this plan have been the deteriorated foreign conjecture and U.S. Federal Reserve’s policy change.

The report warns that a period where global liquidity conditions become more challenging will start with the end of the monetary easing in October.