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Fears of a Property Bubble Forming in Turkey Are Unfounded

Posted on 10 January 2013

There have been quite few concerns that a property bubble could form in Turkey, leading to the kind of problems seen in Spain. However experts don’t think this is very likely to happen due to a number of different factors. Recently Turkish banks have been reducing interest rates on home loans, and this is meant many people have taken the plunge to buy a property.

In addition mortgages with low interest rates are being advertised more aggressively, and this has led to an increase in the number of customers, especially amongst those choosing to buy a second home. in spite of this some experts are worried this could create a greater than anticipated rise in house prices that could ultimately lead to a decline in demand. Some are worried that property developers may not be able to sell their full inventory and that this could result in a surplus which in turn would lead to new projects being put on hold.

New construction has been one of the main drivers of the Turkish economy over the past 10 years, and it’s vital that this sector doesn’t stagnate. Another concern is that some people may be unable to meet their mortgage repayments in the future. However the general view is that a housing bubble is unlikely to occur in Turkey.

New legislation recently introduced has made it easier for foreigners to purchase property in the country. The government is currently investing in a number of urban transformation projects that should lead to sustainable and controlled growth within the property market.

The proportion of mortgages in Turkey is still relatively low in comparison with other countries that have gone on to experience property bubbles, such as the US and Spain. In addition Turkey has a young population, and the annual housing need is calculated to be 800,000.

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