Fear of a new hike in housing prices: how will interest rate according to income effect prices?

Although 5 months have passed since the last “housing loan package” announced by the government, another new loan package is coming in December. This time with three different interest rates according to the citizen’s income… Experts on the other hand warn “There is not enough production and low-interest loans will only increase prices”.

In the following days, the announcement of a new housing loan campaign with different interest rates according to the income of the citizens caused concern about a new increase in housing prices.

It is stated that while there is not enough housing production and the existing housing stock has melted, the revival of demand with low-interest loans will increase housing prices.

A real estate expert said a policy that will strengthen the demand would only pull the prices up in a market without enough supply. Another expert said such a step would cause mobility in the market, leading to price increases.  

The President of the Confederation of Construction Contractors (IMKO) on the other hand stated that the increases in question would be in areas where there is a housing stock and would take place in the 5 percent band.

DIFFERENT INTEREST RATES FOR THE LOWER, MIDDLE AND UPPER CLASS

The Treasury and Finance Ministry met with contractors in the middle of this month and received expectations about the housing loan campaign, which is expected to be announced in December, as well as the problems in the sector.

First, according to the information shared in the news prepared Leyla Ilhan from “How to Make an Economy” (newspaper) the previous day, a new housing loan campaign will start in December, and these loans will be offered at three separate interest rates according to the citizen’s income.

IMKON President also stated that a new housing loan campaign would be announced with three different interest rates for lower, middle and upper income earners at the meeting, and that although it is not yet clear, the interest rates in the campaign are expected to be in the range of 0.69 to 1.20.

IMKON: PULLS UP AT LEAST 5 PERCENT

Stating that they supported the new package to be announced, but are concerned that it would negatively affect housing prices, IMKON president said, “The prices of houses in the range of 500 thousand TL to 3 million TL will increase. However, these increases are regional and occur where there is a housing stock. It does not happen at the same rate for each apartment. I predict that there will be an increase in the average band of 5 percent.”

“THERE IS NOT ENOUGH PRODUCTION, IT WILL INCREASE PRICES”

A real estate appraiser on the other hand, emphasized that the reductions in loan interest rates had always pushed up prices and suggested using the resource to accelerate housing supply instead of stimulating demand.

”Any policy that will strengthen demand in a market where there is not enough supply will only push up prices” he said. He went on to say, “If a loan is to be granted now, the supply should be accelerated by directing it not to finished second-hand houses, but to houses that are under construction or are almost finished. This both limits price increases and makes it easier for people to access housing.”