Rapid growth
According to GYODER estimates, a record 600,000 homes will be sold in Turkey in 2005, up 22.4% from 2004’s figure of 490,000. “The mortgage business is set to grow rapidly, given the recovery in the economy and declining interest rates,” Bülent Sengönül, an equity analyst with Is Investment, one of Turkey’s biggest brokerage houses, wrote in a report on real estate investment companies.
According to Mert Ülker, a certified financial analyst at brokerage house TEB Investment: “Availability of longer-term consumer financing at historically attractive rates has unleashed the pent-up demand in the (housing) industry.”
Most Turkish banks now see long-term housing finance as one of the few areas where they will be able to make profits. Currently, banks give out housing loans as consumer credits, financing loans from their own assets or by borrowing from local and international money markets. But experts say this poses enormous risks.
“The banking system can’t support the housing industry under the present circumstances,” said Tevik Türel, senior vice-president and director of the Eurasia and Middle East region for Stewart International (a Houston, Texas-based real estate information company), at a foreign investors’ conference in Istanbul in mid-November. “Banks are borrowing funds on the short term and lending them out over the long term. This is producing huge maturity mismatches. The banking system will face serious difficulties in 2006 if a viable mortgage system isn’t introduced soon.”
Under the draft law on mortgage finance, banks and leasing companies will provide long-term mortgage loans and lease-like credits to prospective home buyers, covering up to 70% of the total cost of their homes. The home owner will have to meet at least 30% of the cost in advance. The banks and leasing companies will sell the mortgage contracts to a pool of new mortgage finance companies that are to be established, which will issue bonds, asset-backed securities and mortgage-covered bonds on the domestic and international markets to institutional investors, such as insurance companies and pension funds, to provide long-term funding.
“We are trying to create a system where individuals who want to become home owners will be able to tap the funds of investors who have long-term savings,” says Dogan Cansizlar, president of the Capital Market Board (SPK), an agency that regulates the capital markets.
Secondary market
“A secondary market will emerge and it will become easier to become a home owner in Turkey,” says Mr Sur. He predicts that Turkey’s annual housing loan market could reach $60bn once the mortgage system is in full swing.
Another knock-on effect, he says, will be a reduction in the number of jobless Turks. At 9.1%, Turkey has one of the highest unemployment rates in Europe. Unemployment is particularly high among white-collar workers, many of whom lost their jobs during the 2001 recession. “Long-term financing will allow the construction industry and the real estate market to grow further and help to solve Turkey’s unemployment problem,” says Mr Sur.
Manufacturers of cement, glass, steel, forestry products, home textiles, furniture and building materials, as well as producers and retailers of construction equipment, motor vehicles, household appliances and home electronics, stand to benefit from the coming boom, he says. “The Turkish mortgage market will feed over 240 side industries and will make great contributions to the economy.”
High expectations
Turkey expects to attract considerable foreign investment into the real estate sector once the mortgage law has been passed. Dubai International Properties plans to spend $5bn on property development in Turkey, including construction of Europe’s two tallest buildings in Istanbul, the twin 350-metre Dubai Towers.
A consortium led by Royal Caribbean Cruises has won a tender to operate the Galataport, Istanbul’s passenger liner gateway, for 49 years for $4.3bn. The consortium plans to spend $500m on rehabilitating the port and building new hotels, restaurants, cinemas, convention centres, customs facilities, cultural centres, playgrounds, a shopping centre, a museum and a covered car park.
Foreign concerns Rabobank, Fortisbank, Barclays Capital, GE Consumer Finance, Deutsche Bank and General Motors Acceptance Corp have all announced they will enter the Turkish mortgage market.
LOBBYING FOR CHANGE:
GYODER has led the way in lobbying for a mortgage finance system and assisting the Capital Market Board in preparing the draft law that is now before the Turkish national legislature.Founded by a group of real estate development companies in 1999, GYODER encourages growth of the property market, supports the activities of member companies, introduces and maintains standards in quality and control in building projects and training issues, and acts as a lobby for the industry. Today, with nearly 130 members, it has focused on the institutionalisation of the real estate sector and creation of modern cities through new developments, as well as supporting urban renewal and rehabilitation in the inner cities.Members include developers and owners of shopping malls, hypermarket chains, commercial offices, housing complexes, new residential neighbourhoods, restaurant and fast food chains, hotels and holiday villages, as well as major contractors, property assessors and sellers, and commercial banks. Foreign members include Germany’s Metro and Spain’s Real hypermarket chains, US real estate marketing company Remax, property information services firm Stewart International, and the domestic franchises of fast food chains Pizza Hut and Kentucky Fried Chicken.“Our association aims to rehabilitate the housing market in Turkey and take measures against unregistered and low-quality construction of homes and buildings,” says Haluk Sur, GYODER chairman.Once the new mortgage system is in operation, he says, even low income families may abandon the slums for better housing in new areas of the cities.
