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Turkey’s housing crisis: New cheap loan scheme sees prices soar further

Government hopes ultra-low interest rates will help ordinary people buy property, but critics warn only opportunists and the wealthy likely to benefit
According to the Turkish Central Bank, house prices have increased by 106 percent in Istanbul in the past year (Reuters)
According to the Turkish Central Bank, property prices have increased by 106 percent in Istanbul in the past year (Reuters)
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This week, Turkey’s President Recep Tayyip Erdogan introduced new measures aimed at stimulating the purchase of real estate by offering low interest rates.

Mortgage loan interest rates in Turkey currently oscillate annually between 18.5 and 24 percent. The new package, however, offers first-time buyers much cheaper credit, with annual interest rates of 11.88 percent. 

“Due to sharp increases in raw materials globally and also supply problems, the construction sector slowed down while prices increased dramatically," Erdogan said on Monday evening after a cabinet meeting.

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"We have decided to employ an array of measures to prevent our citizens from this fluctuation.”

The new house package includes three different schemes.

First, loans with a monthly 0.99 percent interest rate and up to a 10-year maturity will be available to first-time house buyers for new properties worth up to two million Turkish liras ($130,000).

The second scheme offers a monthly 0.89 percent interest rate and 10-year maturity for people willing to convert their foreign currency or hold gold deposits with Turkey’s Central Bank.

With these measures, Erdogan aims to encourage people to convert foreign currencies and gold that they hold to lira.

The third scheme aims to appeal to suppliers. The president announced that 20bn Turkish lira ($1.3bn) worth of credit would be allocated to construction companies on the condition that they would keep house prices fixed for a year.

Rising construction prices

Erdogan also said the government would “provide 30bn Turkish lira ($1.9bn) of financing to the Housing Development Administration (Toki), Turkey's government-backed housing agency, to build houses for low-income groups”.

The package came amid one of the country’s worst property crises. According to the Central Bank, the annual increase in house prices was close to 100 percent in February across Turkey, with the rate reaching 106 percent in Istanbul.

As Erdogan noted during his speech, increasing construction expenses had played a major role in the crisis, as many raw materials such as cement, iron and concrete were three times higher than they were last year.

Accordingly, supply decreased while demand kept increasing.


In March, Turkey witnessed a record sale of properties, with an increase of 20 percent compared to March 2021. This tendency was triggered by the increase of rental fees, which rise in line with inflation, as well as with the attempt to preserve the value of currency against inflation. 

Due to official interest rates being much lower than inflation and other government schemes to keep the forex rate down, property has become the main investment for people keen to preserve their savings. 

Turkey has been experiencing high inflation and reached 70 percent in April, according to the state-run Turkish Statistical Institute, while independent research companies such as Enag reported that the rate was 156 percent.

Even before Erdogan had finished his speech, people began sharing information about the increase in house prices on social media, since Turkey’s most visited property and car sales website,, allows its users to trace price changes in ads for home or car sales. 

“This is unbelievable,” Bahadir Yasar, a 30-year-old potential house-buyer, said. “In a few minutes, I received dozens of notifications from the application [Sahibinden]. My eyes were dazzled with what I saw.”

The prices of his saved ads increased by 150,000 to 300,000 Turkish lira ($9,700 to $19,500).


Bahadir was not alone in being shocked. Thousands of social media users started sharing screenshots of the same application, showing the sudden and dramatic increase in prices.

The overnight increase in house prices triggered an official response from Turkish Treasury and Finance Minister Nureddin Nebati on Twitter.

He said in a thread that his ministry was closely tracking such "opportunists" who take advantage of the situation by making sudden price increases, saying that it violated free-market rules. 

'We are going to take every step against those trying to victimise our citizens and profiteer'

- Nureddin Nebati, finance minister

"I would like to decisively express that we are going to take every step against those trying to victimise our citizens and profiteer over the [package] we started to implement and we won't tolerate them," he warned on Tuesday.

The public's reaction to the scheme should not have been surprising. When a similar mortgage scheme was offered by the government in 2020, with monthly interest rates reduced to 0.64 percent, prices increased by 30 percent - although inflation and construction expenses were far lower.

Still, some people immediately began searching for suitable properties.

Omer Cemen, a government employee, said he was looking for a flat with the idea that prices would go up anyway.

“If I don’t buy now, the prices will already go up due to inflation," he said. "Moreover, my rental fee will increase by at least 50 percent this year. At least the mortgage payment is fixed for 10 years.”

Still, he noted that several house sellers had increased their prices.


Ugur Gurses, an economist and former Central Bank employee, told Middle East Eye that the main problem with these schemes was their “ambiguity”.

“Who will be the main beneficiary of this package: low- and middle-income people or wealthy ones?” he said, pointing out that the monthly payment for a 2m($130,000) Turkish lira apartment would be around 28,000 lira ($1,840), while the minimum wage was 4,250 lira ($280) and the average salary of high-positioned government employees was around 12,000 lira ($785).

“The investment in Toki would be useful for low-income people, not this interest scheme,” he added.

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He believes that the package was confined to remaining an “announcement effect”, which means, according to Gurses, that “the government is trying to revive the property market that would create further employment since construction feeds sub-sectors”. 

“However, soaring inflation and negative interest rates have already triggered unemployment as well as increasing prices of construction materials, lowering the number of newly built houses in the market since the cost has become too high," he added.

Murat Akgul, a construction company owner, agrees with Gurses that this scheme is useful for wealthy people. But he remains relatively optimistic, albeit with reservations.

“The low interest rate is useful for people who are looking for a financial investment instrument,” he said.

Akgul believes that foreign currencies, gold and the stock market have lost their appeal to investors, but that house prices helped preserve money against soaring inflation.

According to Gurses, it is not odd that prices go up suddenly. “This package will increase the prices," he said. "That’s all.”

But Akgul thinks that construction and real estate companies are the real opportunists, unjustly spiking prices.

“This greed invalidates the government’s efforts to boost the market.”

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