Turkey brief & turkish – canadian relations september 5, 2011 table of contents president’s message chairman’s message

One major urban renewal project of İstanbul is the planned renovation of Tarlabaşı, an old neighborhood with narrow streets located near central Taksim where old Christian, Muslim and Jewish families live together. Many of the centuries-old buildings in the district, including residential apartments, shops, social centers, churches, mosques and synagogues, are in a sad state of dilapidation and in danger of collapsing, requiring immediate action. Some 238 buildings will be renovated, according to Ahmet Misbah Demircan, mayor of the Beyoğlu district municipality. Many of the buildings will be interconnected to form classy shopping arcades, boutique hotels and pensions. Each residential apartment will have an underground car park.

Foreign developers, such as Coldwell Banker of Parsippany, New Jersey, and Emaar of Dubai, have also entered the market.

On February 22, 2007, Turkey’s Grand National Assembly passed legislation establishing a legal mortgage system that gives middle and lower income families the opportunity to become home owners.

Under the law, deposit banks, participation banks and leasing companies will be able to lease homes to customers. Lenders are allowed to borrow funds or create resources from institutions that operate on a wholesale basis, known as mortgage funding institutions.

The law also speeds up collection procedures in case the borrower goes bankrupt.

The law allows lenders to offer variable-rate mortgages that can then be turned into securities and be taken off bank's balance sheets, though this has yet to be applied in Turkey due to nervousness on part of Turkish banks and financial authorities following the collapse of the U.S. mortgage market in 2007.  

Turkish banks require borrowers to pay 25% of the total cost of a home up front in cash before allowing them to take out a housing loan for the remaining 75% cost. The safeguard has prevented the collapse of the Turkish housing market -- unlike in the U.S. -- and kept banking non-performing loans on mortgages to a minimum. Only two percent out of the 907,748 persons (or 18,124 persons) who had taken out housing loans in Turkey were in arrears on payments of installments in the first 11 months of 2009, the Banking Regualtion and Supervision Agency (BDDK), Turkey’s supreme banking authority, reported.

“If the U.S. had applied the 25% advance payments on mortgages, the economic crisis would not reached its present state,” Deputy Prime Minister and Economics Minister Ali Babacan told a meeting of the Eurochambers in İstanbul on February 22, 2010.

CONSTRUCTION PERMITS ISSUED FOR RESIDENTIAL BUILDINGS, 1995-2010

Dwelling units Area

000 Million m²

1995 508 65

1996 454 58

1997 464 61

1998 433 56

1999 339 46

2000 315 45

2001 280 40

2002 161 24

2003 202 30

2004 330 31

2005 546 50

2006 600 57

2007 584 63

2008 503 71

2009 510 79

2010 823 160*

*includes commercial sites

Source: Turkish Statistics Institute, Turkish Union of Contractors, Dünya Newspaper

With interest rates on housing loans hovering around 0.85 percent for 10-year housing loans in May 2011, down from around 1.5% in March 2008, demand for mortgages was once again beginning to rise among low and middle income families in the new year.