7 February 2012

Turkey: signs of a housing bubble


For the repayment of property purchased on credit, it takes rising real estate prices. The Turks are heavily indebted and the construction industry is showing the first symptoms of crisis. A scenario that is reminiscent of the bursting of the housing bubble in the U.S. 2005th

In Turkey, a dangerous mix of simmering crisis symptoms: Turkish banks have issued loans of 2011, most emerging economies, and thus doubled the debt of the Turks. Since January 2012, but lending slumped by 27%. At the same time in the third quarter of 2011 to 5.18% sold fewer houses than in the second quarter.

The U.S. housing bubble began in 2005 with a simple insight to burst: At that region of the U.S., where housing prices rose rapidly and consistently, there were few defaults on home loans. In regions where prices climbed but there exploded the number of defaults.

In December 2011, the investment bank, Bank of America Merrill Lynch warned against investing in Turkish property. “The demand will go back to real estate, and thus push up property prices down, while construction costs continue to rise due to the high inflation rate,” the analyst said ECEM Nalbantgil in December. “The housing market in 2012, we expect 40% fewer sales than in 2011.”

2011, Turkey had nearly 35% yet the highest growth in lending of all emerging markets. This was, however, the per capita volume of loans – doubled within five years – that debt every single Turk. In January 2012, the Turkish banks now awarded 27% fewer loans than they were a year ago. At the same time the inflation rate to 10.6% in January 2012 has reached its highest level since late 2008.

Even the booming Turkish property Engine: The house prices were in November 2011 at nearly 10% higher than a year earlier, describes the REIDIN New Home Price Index. But the first signs of crisis are now also in the construction industry. The Turkish construction industry has grown in the third quarter of 2011 to only 10.6%. This is a decrease by 2.8% compared to the second quarter, says the Turkish Constructors Association’s (TCA). In addition, in the third quarter of 2011 to 5.18% less homes sold than in the previous quarter. The prices of building materials have risen at the same time by 5%.

Economic growth in Turkey has in recent years lived among other things, that the Turkish households have bought on credit, real estate. And this policy could – just like in the U.S. in 2005 – also Turkey still catch if overpriced real estate decline in value and so-called “bad loans” can not be repaid. But it might benefit the tenants because “many empty houses and flats to the bargaining power shifts from landlords towards the tenants,” said ECEM Nalbantgil of Merrill Lynch.

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