Türkiye's new regulations aimed at encouraging first-time homebuyers and curbing loans for people already owning residential property will stabilize the market and help curb the upward trajectory of housing prices, industry officials say.
The Banking Regulation and Supervision Board (BDDK) on Friday adjusted the credit-to-value ratios for housing loans and loans secured by real estate, alongside imposing certain constraints targeting those seeking to purchase their second homes.
The amendments include a reduction in the housing loan credit-to-value ratio to 75% if the consumer, their spouse, or any of their children under 18 already own at least one property. Those purchasing a second registered property will be eligible to obtain a loan equivalent to just 22.5% of the property's value.
The watchdog increased the risk weights on loans extended to such consumers in the calculation of banks' capital adequacy standard ratios.
It said the risk weights for loans secured by residential real estate mortgages to be used for housing acquisitions will be applied as 150% if the "standard approach" is used.
Nazmi Durbakayım, head of the Istanbul Constructors Association (INDER), regarded the limitation on loans as a step toward fostering a more stable market environment.
Durbakayım emphasized that the decision would not only reduce the amount of housing loans availed from banks but could also steer those interested in purchasing a second or third home toward company-based credit options.
He raised concerns about the potential indirect impact on the interest rates within companies due to increased risk premium rates imposed by BDDK, further compounded by rising credit interest rates in the financial sector.
"This decision will make the acquisition of housing for investment more difficult. In other words, it will take real estate, which has been known as a safe haven, one step back among alternative investment vehicles," Durbakayım said.
Households have been seeing real estate as an attractive investment tool to shield themselves from stubborn inflation, which subsequently eased to as low as 38.21% in June but rose again to nearly 48% last month due to the Turkish lira’s decline and various tax hikes.
Officials have acknowledged it would rise further toward the year-end. Inflation had leaped to a 25-year high above 85% last October.
Housing sales rebounded in July after five consecutive back-to-back declines. Some 109,548 residential properties exchanged hands last month, according to the Turkish Statistical Institute (TurkStat) data, marking a 16.7% year-over-year increase, driven in part by the low base effect.
Property sales had dipped as much as 44.4% in June on an annual basis, the steepest decline this year, as residents struggled to find affordable homes due to soaring prices.
Mortgaged sales in July fell 24.1% from a year earlier to 14,533 houses, accounting for 13.3% of total sales.
Although remaining at high levels, the increase in house prices has been easing over recent months, according to official data.
The residential property price index (RPPI), measuring the quality-adjusted price changes of homes, surged an annual 95.9% in June, according to the central bank data. Month-over-month, the index rose 4.8%.
Since the May presidential elections, President Recep Tayyip Erdoğan's government orchestrated a U-turn away from policies based on interest rate cuts that had been accompanied by a steep fall in the lira and soaring inflation.
As part of the policy pivot, the central bank has hiked its key policy rate by a combined 1,650 basis points since June to 25% to address soaring prices. It also vowed to continue gradual monetary tightening.
In the first seven months of the year as a whole, house sales in Türkiye dropped 17.7% from a year earlier to 675,327 units.
Mortgaged sales fell 24.1% from a year earlier to 136,063 houses.
Ismail Özcan, head of the Real Estate Marketing and Sales Professionals Association (GAPAS), lauded the restrictions as a positive step to increase the general homeownership rate in Türkiye, which he said had dipped to around 50% from an average of 60% in recent years.
Özcan noted that the regulations could ease financial access for those aiming to purchase their first homes and maintain housing demand at a reasonable level, thereby deterring excessive price surges and mitigating inflationary pressures.
"The fact that investors will not be able to buy their second home due to credit restrictions may negatively affect the supply of rental housing or affordable second-hand homes," he noted.
Özcan further explored potential consequences, such as hindering real estate investment and slowing down the sales cycle, which might subsequently lead to a decrease in housing production speed.
Ulvi Özcan, chairperson of the Istanbul Real Estate Brokers Club Cooperative (IstebKOOP), expressed regret that these measures hadn't been implemented years earlier.
He acknowledged that even during the COVID-19 pandemic, many took advantage of attractive loan opportunities to purchase second and third properties. He considered the move a necessary one for a social state and urged for a comprehensive housing policy to maximize the impact of these regulations.
"The work done is correct, important and necessary, but it is not enough," Özcan said. "I hope that other regulations that will bring benefits will be multiplied by taking into account similar positive examples in contemporary countries."