Turkey Builder Emlak Konut Sales Fall as Mortgage Costs Rise

Rising borrowing costs in Turkey are stifling home sales as the country’s biggest property developer reported the worst start to a year since at least 2011.

The number of home sales at Emlak Konut Gayrimenkul Yatirim Ortakligi AS (EKGYO) plummeted 61 percent to 543 last month from the same month last year, according to a filing with Borsa Istanbul on Feb. 14. That’s the lowest January figure since at least 2011 and compares with 893 homes in December.

Interest rates on home loans have increased considerably since June,” Murat Ignebekcili, an analyst at Burgan Securities in Istanbul, said by phone today. “That’s reducing consumer appetite. The market may be entering a pause after last year’s boom.”

Mortgage rates averaged 12.84 percent on Feb. 2, the most recent data from the central bank show. That compares with a record low of 8.29 percent on June 21. Benchmark two-year sovereign yields have increased 2.74 percentage points to 10.79 percent in the same period.

“Comparing monthly sales wouldn’t be accurate,” an official at the Istanbul-based Emlak Konut said by phone today, asking not to be named in line with policy. “Sales were high last January as we introduced new projects. Nowadays there aren’t new projects.” Interest rates are “at acceptable levels” for property investors, the official said.

The number of homes sold in Turkey rose 63 percent to 1.14 million last year, according to data from the statistics office in Ankara. Emlak Konut sold 15,166 homes in 2013, up 69 percent from the previous year.

Not Sustainable

“Mortgage rates should be at single-digit levels,” Aziz Torun, head of the Istanbul-based Association of Real Estate and Real Estate Investment Companies, said by phone today. “Current levels aren’t sustainable for home buyers.” Torun is also the chairman and chief executive of the construction firm Torunlar Gayrimenkul Yatirim Ortakligi AS. (TRGYO)

Emlak Konut, whose biggest shareholder is the state housing authority TOKI, first sold shares to the public in November 2010. It has privileged access to state-owned land, which it auctions to real-estate developers for a share in the revenue generated. The company sold 1.3 billion shares at 2.5 liras each in a secondary share sale in November. The offering cut TOKI’s share to 49.3 percent from 75 percent.

The property developer fell 14 percent in Istanbul since Dec. 17, when its chief executive officer Murat Kurum and two board members were called in for questioning amid scores of arrests tied to an investigation into allegations of graft involving government officials and public tenders. They were released after questioning, the company said on Dec. 22.

Emlak Konut shares declined 0.4 percent to 2.28 liras at the close in Istanbul. The benchmark Borsa Istanbul 100 (XU100) index gained 1.1 percent to the highest level since Jan. 22.

To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net

To contact the editor responsible for this story: Samuel Potter at spotter33@bloomberg.net

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