Housing-construction market risks in Turkey: overrated or underestimated?
Housing Finance International
Download Document| Date Published | 2013 |
| Version | |
| Primary Author | Yener Coskun |
| Other Authors | |
| Theme | |
| Country | Turkey |
Abstract
Turkish real estate markets, involving housing sub-markets, have shown remarkable growth in the last decade. Foreign institutional/individual investment has also been growing in this period in addition to traditional domestic investments. The critical components, which made contributions to this picture, are mostly related to macro-economic stability and relatively stable growth in GDP and the income/financial wealth of households. Lower mortgage rates and other positive market conditions (i.e. a long period of political/economic stability, economic growth and rising income levels, industry friendly government policies etc.) helped to improve the access to mortgage/construction finance. Despite negative impacts of the global financial crisis, one may also observe that Turkish housing markets still show strength in many respects. Although housing-construction markets have a positive outlook, some argue that there could be excess supply and even a real estate bubble risk. This is currently one of the most widely debated topics in the marketplace and some academic circles, although data constraints limit the discussion. The paper aims to document the risks of the Turkish housing-construction sector in the post global financial crisis period and to analyze the potential impacts of these risks. This research question is evaluated by a literature search and comparative data analysis. In this context, the first set of questions concerns the attempts to analyze risk parameters of housing-construction loans. Secondly, we will address whether the regulatory framework provides an efficient tool for managing mortgage risks. In doing so, the paper highlights whether the Turkish housing-construction sector may continue to perform well in the near future. Therefore, from a practical perspective, the paper provides a current picture of the Turkish housingconstruction sector with a risk analysis. The paper is organised into four further sections. In Section 2, we will analyze Turkish housing markets in the 2000’s by particularly focusing on the post global financial crisis period. Section 3 gives an analysis of the risks associated with the housingconstruction sectors, by also including discussion on ponzi finance, and legal/financial risk analysis of the Turkish mortgage market. Finally, section 4 concludes the paper.