ISTANBUL (Reuters) – Turkish builders say new government schemes to support the real estate sector will boost home sales but that they fall short of addressing skyrocketing house prices that have surged nearly 100% annually.
President Tayyip Erdogan announced three separate loan packages on Monday to address soaring real estate prices, as residents struggle to find affordable homes to rent or buy after last year’s currency crisis.
One measure was a loan package for construction companies to finish incomplete projects under the condition that they promise to keep their home sale prices unchanged for a year.
Contractors say the schemes, which also include cheap mortgage loans, will help boost housing sales by around 20% but will do little to stop rising house prices in the short-term.
Builders cite rising input costs, the lira’s depreciation as well as thin supply in the housing market as reasons for the surging prices.
Sefer Altioglu, board member at home builder Mint, said construction costs rise 10% monthly, which then need to be reflected on house prices.
“If I have eight months left to finish my project, that means a cost increase more than 80%. Why should I bear this cost and keep the prices stable to benefit from a cheap loan?” Altioglu said.
The construction index has soared 102% year-on-year in March, according to data from the Turkish Statistical Institute.
The residential property price index also leapt an annual 96% in February, the latest central bank data shows. In Istanbul, the index climbed 106% on the year.
Altioglu said that companies don’t want to start new projects due to “unpredictable” costs, as well as uncertainty over whether they can sell the homes as Turks’ purchasing power deteriorates with rampant inflation at 70% in April.
Erdogan said the loan package for construction companies aim to raise the housing supply, thereby bringing prices to balance. He said the cheap loans would also help Turks buy new homes.
Ibrahim Babacan, chairman of home builder Babacan Holding, said the government should also support new projects and not only incomplete ones to raise supply further.
He said home sales would increase 20-25% as a result of cheap loans but that the measures do not provide a solution for surging house prices.
“Housing loans with 0.99% rate are so attractive in a country with an annual 70% inflation rate. No doubt buyers will take advantage of this,” he said.
(Reporting by Ceyda Caglayan; editing by Frank Jack Daniel)