Atila Şenol is Board Chairman of Mesa, one of the leaders of the housing sectors. He says that housing started to pick up in 2003 and really began to gather pace in 2004. He believes that this boom will continue, because Turkey needs 500,000 new housing units every year, of which 80 percent are for middle and lower-middle income groups.
The mortgage credit system has recently begun to be discussed in Turkey. But there are several obstacles preventing its implementation. Atila Şenol, who is Board Chairman of the Mesa Companies Group and one of the doyens of the housing sector, notes that it will be difficult to introduce the system under current interest rates. But this system is expected to play a role in reducing the housing deficit in Turkey.
Mesa Companies Group Board Chairman Atila Şenol evaluated the Turkish housing sector and its future for Capital.
Could you explain what is happening on the Turkish housing market?
The housing sector will continue to develop in the future. There was a major recession in both demand and production in the housing sector after the 1999 earthquake. Until 2003 there was a build-up of demand. From the second half of 2003 onwards, political and economic stability meant that demand began to pickup. This continued into 2004 and the sector began to grow. There may be occasional downturns but when I look to the future I think that demand will grow still further.
When do you think demand will pick up again?
It would be misleading to give a precise date. If things can be made easier for homebuyers then this will boost demand for housing. The most important boost would be in finance. The introduction of a mortgage system is one of the things which would improve matters. This system, which benefits everyone and has been used in Europe and the USA for years, enables buyers to access long-term, low-interest loans.
In order for this system to be introduced both inflation and interest rates must be at a very low level. Loans are given for 15-, 20- or 30-year terms. But I think that at the moment in Turkey there is an element of uncertainty for both those who extend and those who take loans. For example, a bank gives a 3-5 year foreign exchange loan. But if the exchange rate suddenly goes through the roof then the borrower is left in a very difficult position.
But the impression has been given that the mortgage system is going to be introduced this year?
At the moment there are some question markets about the introduction of the system. The volume of the credits is so large; what will be the interest rate? In Europe and the USA the interest rate is 3-5 percent per annum. It is impossible to find a rate like this in Turkey. Funds will come from abroad. These will be in Euros or dollars. Who will shoulder the risk for a potential increase in the exchange rate? As a result, the loans must be in Turkish Lira and the Turkish Lira interest rates must be at an acceptable level. We have yet to achieve such an acceptable level. The uncertainty about the interest rates means that I still have my doubts about the long-term credit system.
Today real interest rates are over 10 percent per annum. If you also factor in an inflation rate of 10 percent then you have an interest rate of over 20 percent. With figures like these long-term credits do not look possible at the moment.
If we imagine that the system is introduced in Turkey, how will it effect demand for housing?
As has been said before, if it is possible to get a 20-30 year loan with payments which are like rent, then everybody will buy their own home. There is a very strong desire amongst the Turkish public to own their own homes. Research shows that 60 percent of Turks own their own homes. This means that, if is it possible, 100 percent will want to be homeowners.
This survey shows that the Turkish public long for two things: to own their home and give their children a good education. As a result, if it becomes possible to become a homeowner by paying the equivalent of rent, then this demand will come from everyone.