The debt share in the construction sector of the real estate market in Turkey is currently 10%. Non-performing loans may cause serious problem for the Turkish economy. Its total amount is equal to 33 billion Turkish liras (€11.6 billion). Some experts believe that if the situation does not change, housing "bubble" may grow in Turkey.
The development sector in Turkey is one of the fastest growing industries. In 2013, it grew by 7.1% and in 2014 is expected increase by 5%. This is excellent performance, if taking into account the fact that the country's GDP increased annually by 4% in average. An outstanding builder’s debt exists in all 83 regions of Turkey. According to the "Antalya Today" site, the largest values of the construction sector debt were reached in country’s cities with major population: in Istanbul and Ankara – 2.25 billion Turkish liras (about €790 million) for the two cities; that actually means that almost all late payments are divided between the largest Turkish city and country’s capital. For comparison, the share of total construction segment outstanding loans amounts 2.97 billion Turkish liras (about €1 billion), or about 10% of all loans in Turkey.
Third place in outstanding debts belongs to Bilecik, located in the north-west of Turkey. Its share of unpaid credits issued for the construction amounted to 33.2%. It is followed by Kayseri, Istanbul, Bitlis, Karabuk, Aksaray and Yozgat if speaking in terms of percentage share of bad loans for construction purposes.
Ankara is the capital of Turkey
Difficulties with loan repayments have mostly afflicted small, recently opened companies. Large firms pay out loans without any difficulty. Turkish construction firms have already paid to banks 79 billion lire (about €27.8 billion).
The main problem which might be caused by current economic situation is so-called "bubble". This term is used in describing the market when prices begin sharp increase resulting raise of loans at reduced interest rates. This trend can be observed as long as prices do not reach their maximum and then will collapse sharply.
It is noteworthy that large loans also exist in mortgage segment, which grew by a third in 2013. Generally almost half of all homes in Turkey is purchased by installment.
Recently, Turkish banks have reduced the percentage of long-term loans to 0.9%. While real estate sales in the current year have decreased by 7.8%. Turkish Weekly site recorded the fall in demand in May 2014. It was 12% and, according to Turkish analysts, was caused by currency fluctuations. More than 1 million units of real estate, are offered in the market the moment and yet it is unknown whether all housing is sold or not.
The bridge over the Bosphorus, Istanbul
The cost of houses and apartments in the Turkish cities, is although growing every month. For example, in July 2014 it exceeded last year's whole country figure by 11%. In Istanbul, prices rose by 21.59%. New houses and apartments also increased but not so much. In July its costs increased by 0.74%.
Banks call such real estate market situation in Turkey a good trend. According to some bankers, the rise in prices guarantees safe investments in Turkish housing. The Republican People's Party of Turkey shares another opinion. Its members believe that these are the first harbingers of the crisis that will broke out in Istanbul, spreading to other cities, with the largest ones to be the first. Management measures, according to the politicians, should be taken by the government immediately.
Opinions vary, but the rise in prices and mortgage loans continues. Experts believe that the "bubble" on the real estate market is more than just possible, although the Turkish government denies the likelihood of such a situation.
Text: Kyrill Ozerov, ee24.com