Turkey is failing to address skyrocketing house prices, builders say
Turkish builders say government measures to support the real estate sector and help more Turks afford property fall short of dealing with house prices, which have surged by almost 100 percent annually.
President Recep Tayyip Erdoğan announced the steps on Monday. They included inflation-busting mortgage loans for cheaper housing, and support for unfinished construction projects, so long as builders promise not to raise the price of the properties for a year.
Contractors say the schemes will help increase house sales by around 20 percent but will do little to prevent prices rising in the short-term, Reuters reported on Wednesday.
Builders say the price of property is surging due to rising input costs, weakness in the lira and limited supply in the market.
Construction costs are rising by 10 percent every month and firms need to reflect that on house prices, said Sefer Altıoğlu, a board member at home builder Mint.
"If I have eight months left to finish my project, that means a cost increase of more than 80 percent. Why should I bear this cost and keep the prices stable to benefit from a cheap loan?" Altıoğlu said.
The central bank’s residential property price index jumped by an annual 96 percent in February. The index for Istanbul rose by 106 percent.
Companies do not want to start new projects due to "unpredictable" costs and uncertainty over whether Turks will be able to afford new homes once they are built, Altıoğlu said. Purchasing power is declining in the country after annual inflation surged to 70 percent, the highest level since a financial crisis two decades ago.