Turkey seeks ways to reduce home prices

ANKARA

Turkey is looking for ways to reduce home prices by producing expensive imported construction materials inside the country.

“We will take steps to manufacture construction materials 100 percent locally. The importance of domestic production once again became clear amid the COVID-19 pandemic,” Environment and Urbanization Minister Murat Kurum said.

The pandemic disrupted global supply chains, making it difficult for the economies to deliver goods and materials. 

Local developers faced difficulties obtaining construction materials from other countries amid the outbreak, luring the government to try to find a solution to the industry’s problems.

State-owned participation bank Emlak Katılım Bankası and state-owned real estate investment trust Emlak Konut will finance investment, which will facilitate the local production of the imported construction materials and other goods including elevators and escalators, according to Kurum. 

People from the industry reckoned that local production might result in a 15 percent to 20 percent decline in construction materials, which in return can bring down home prices in the medium to longer-term. 

The latest data from the statistics authority (TÜİK) showed that the construction cost index jumped nearly 7.5 percent in July from a year earlier.

On the other hand, the construction materials cost index exhibited a 4.2 percent rise on an annual basis in the month. 

In the wake of the COVID-19 pandemic, the government took some measures to contain the damage on the country’s key construction and real estate sectors.

State-owned lenders started to provide cheap loans, which eventually gave a boost to demand for homes. 

Reflecting on the effects of the favorable environment in the housing market, which was brought about by low-interest rates on home loans, residential property sales in Turkey leaped more than 124.3 percent year-on-year in July, according to the latest official data.

A total of 229,357 houses changed hands in July this year, up from 190,012 the same month last year, TÜİK reported last month. 

More strikingly, mortgage-financed home sales soared nearly 901 percent year on year to some 131,000 units in July. Mortgage-financed homes sales accounted for 57 percent of all property sales. 

In the first seven months of 2020, more than 854,000 homes were sold, marking a 41 percent rise from the same period of the previous year. 

The country’s Central Bank reported that the presidential property index in June recorded an increase of 25.7 percent in nominal terms and 11.6 percent in real terms on an annual basis.

In Istanbul, the country’s largest city, home prices increased by 20 percent year on year, while the increase in the capital Ankara was 26.4 percent.