Turkey’s middle class squeezed out of home ownership

A government home loan facility has met with little enthusiasm in Turkey as soaring house prices and waning purchasing power make home ownership a distant dream even for professionals of the middle class.

The relatively cheap loans, announced by President Recep Tayyip Erdogan on May 9, came amid unprecedented turmoil in the housing market. House prices have doubled in a year, outpacing headline consumer inflation, which hit 70% in April, fueled mainly by the sharp depreciation of the Turkish lira since last year.

Alper Ozkok, a doctor and faculty member at a university hospital in Ankara, is among millions of people who feel deprived of adequate housing even after the loan facility. “As a doctor for 12 years, I am now unable to buy a house in Ankara,” he told Al-Monitor.

Ozkok and his wife, also a healthcare worker, thought about buying an apartment when their landlord asked them to move before the loan scheme was introduced. “We thought we’d rather buy a house than pay 5,000 lire [$313] for rent,” the 35-year-old said, noting that he and his wife bring in 25,000 lira ($1,570) a month together.

“We had seen prices go up day by day, and with the announcement of the package, the prices of houses eligible for loans went up again,” Ozkok said, referring to the immediate rise in listing prices after the announcement. Erdogan’s announcement. “Apartment prices start at around 2.5 million lira [$156,500] in and around the neighborhood where we currently live. A loan of 2 million lira would mean monthly payments of more than 28,000 lira. It’s more than we earn.

Home prices in Turkey are up 96.4% from a year ago in February, Central Bank data shows, with a rate exceeding 102% in new construction homes. In Istanbul, the country’s most populous city and the most expensive in terms of housing, house prices rose 104% over the same period, reaching more than 13,800 lira ($864) per square meter. The price spike was fueled by a shortage of supply as soaring construction costs stalled housing investment, coupled with robust demand driven by affluent buyers investing in property to protect their savings inflation and the fall of the lira.

In the same way, rental prices were up 84.2% from a year ago in February, according to data from a respected think tank, based on the listings. The increase exceeded 100% in Istanbul, Ankara and the third largest city of Izmir. In Istanbul, the average rent for a three-bedroom apartment reaches 5,000 lira, exceeding the minimum wage of 4,250 lira, the monthly salary of almost half of the country’s employees.

Under Erdogan’s scheme, state-owned banks offer 10-year loans with a monthly interest rate of 0.99% to first-time buyers buying new homes for up to 2 million lira. In addition, buyers of homes up to 2 million Lira who pay at least half the price by converting hard currency or gold deposits are eligible for 10-year loans with 0 monthly interest, 89%.

The online calculation tool of the public Ziraat Bank estimates the monthly payments at 28,600 liras for a loan of 2 million liras over 10 years in the first category and at 14,250 liras for a loan of 1 million. Such sums are prohibitive for most social strata in Turkey, where the minimum wage of 4,250 lira or slightly higher salaries has become the predominant wage in the private sector, while salaries for civil servants average less than 7,000 lira. read.

Derya Kurt, a lawyer in Istanbul, said she and her husband, who also works in the private sector, had been saving for a house and were excited when the loan facility was announced. “But our joy was short-lived. We lack revenue to use the bundle,” she said.

The economic crisis has deterred people from hiring lawyers, directly affecting her income, Kurt complained, adding that she and her husband earned at best some 30,000 lira a month. A decent apartment in their Kucukcekmece neighborhood, about 30 kilometers (17 miles) from downtown Istanbul, would cost at least 1.75 million lira, she said. “And the monthly repayment of the loan is all of our income. As two working college graduates, we are not in a position to buy a house today – we can only dream of it,” she added.

The housing crisis is not exclusive to large urban centres. Meryem, a 44-year-old academic who wished to be identified only by her first name, lives in Mardin, a city in southeastern Turkey not far from the Syrian border. For two years, she and her husband, also an academic, have been waiting for the opportune moment to buy a house, but in vain.

“A suitable apartment for us and our child costs between 1.5 and 2 million liras in Mardin,” Meryem said, adding that the government loan scheme was beyond her family’s means. “We have a child who will go to high school next year. And because of inflation, the money we spend on food alone has doubled. If we take a loan of 1.5 million lira today, we will only have 4,000 lira left for the month after the loan is paid off,” she said.

Tarik Sengul, a senior urban policy researcher at the Middle East Technical University in Ankara, said middle-class professionals such as doctors, engineers and bankers could buy high-quality houses with loans , but that profound changes in the markets have changed everything. . “Although this mechanism remains functional to some extent, we now live in a world where asset markets in general and real estate markets in particular are becoming increasingly self-referential, i.e. they create their own reality,” Sengul told Al-Monitor. “And the income generated in the labor market by jobs and professions defining the middle class is no longer enough to enter the game.”

According to the researcher, middle-class people are now exploring “how to become players” in real estate and other asset markets, often venturing into risky areas. “Those who have turned to Bitcoin and similar speculative investments lately are taking big risks. In this context, the house that one wants to buy in order to feel at peace has in itself become a source of distress,” he said.

Edward N. Arrington