Mortgages for Property in Turkey

Approved late Wednesday night and due to come into effect on the 1st of January 2008, the new law relating to mortgages for property in Turkey should represent welcome long term support for the housing market and the Turkish real estate economy as a whole.

However the new Turkish mortgage law didn’t go as far as many had hoped, and following pressure from the International Monetary Fund and the Finance Ministry the law relating to interest payments being tax deductible was not ratified.  So what will this law actually mean for those who need mortgages for property in Turkey?  Let’s take a look…

There are those who are highly skeptical about the new mortgage law and who believe that although long term finance products will be available from January few local Turkish citizens will take up the offer because interest rates are too high currently, interest payments are not tax deductible and because of those who can afford finance, the majority don’t require it.

Others believe that the availability of finance will result in property prices in Turkey increasing because a lack of affordable finance artificially held back prices.  On top of this fact they believe that the new law will force interest rates to fall and make the entire housing market far more flexible and liquid.  It is hoped that the availability of mortgages for property in Turkey will kick start a resale market where buyers previously were reluctant to head because they couldn’t enter into payment plans with the vendor – and what’s more, the availability of long term loans could see more local involvement in the construction industry. 

Previously only 3% of the entire construction industry was funded by long term finance arrangements which put exceptional pressure on both the constructor and his customers who are often used to finance a project.  This has led to many problems in the past.  If a constructor cannot manage his money or doesn’t get the sort of off plan sales required, the entire construction project could fail at any point.  With a bank backing the project with a long term mortgage many more projects could be started and completed!

For foreign buyers of property in Turkey the new law doesn’t actually mean much at the moment.  Few international lenders are expected to enter the marketplace initially and the local lenders will only be looking to the local consumer to lend to.  What’s more, loans will not be available to finance off plan property purchases which is what the majority of overseas buyers are currently purchasing.  Over time the greater use and wider understanding of mortgages in Turkey could mean that a broader range of products become available which could be accessible to overseas buyers…watch this space!