Turkey Home Sales May Break Record on State Support, Is GYO Says

The Turkish government’s pledge to support first-time home buyers may boost sales by more than 10 percent to a record, according to the nation’s third-biggest real estate developer.

The government will match as much as 15 percent of savings to meet the mandatory 25 percent downpayment to secure a mortgage, Prime Minister Ahmet Davutoglu said in Ankara on Jan. 28. The measure will “relieve the construction industry” that’s “a locomotive” of the economy, he said.

“This would also increase the cash flow for builders,” Turgay Tanes, chief executive officer of Is Gayrimenkul Yatirim Ortakligi AS, said in a Jan. 28 interview in Istanbul. “Home sales could rise to about 1.3 million units this year” from 1.17 million in 2014, he said.

Turkey’s economic growth slowed to 1.7 percent in the third quarter of 2014 and was probably about 3 percent for the year, Deputy Prime Minister Ali Babacan said in Ankara on Jan. 6. That’s below the government’s target of 4 percent. The statistics office will publish full-year data on March 31.

President Recep Tayyip Erdogan defended the role of construction in Turkey’s economy on Dec. 12, amid calls for a greater focus on industry. “If you tell construction to stop and manufacturing to move, a collapse follows,” Anadolu Agency cited him as saying.

Capital Gains

Erdogan’s statement followed remarks on the real estate industry by Finance Minister Mehmet Simsek, who said in a Dec. 2 interview that the government would impose taxation on capital gains from real estate, along with measures to deter corruption in the land permitting process.

Such measures would have hurt economic growth, Is GYO’s Tanes said. He now expects the capital gains plan to be turned into “an exception” rather than “an upfront tax,” he said.

Istanbul-based Is GYO, a unit of lender Turkiye Is Bankasi AS, focuses on office and retail properties. The developer expects about $57 million in rental income this year, up from an estimated $55 million in 2014, Tanes said. The company targets $120 million in 2018, he said.

Annual home sales in Turkey surged almost three-fold last year from about 427,000 units in 2008, the earliest year data is available, according to the statistics office in Ankara. The average interest rate on mortgages halved in the same period to 11.1 percent as of Jan. 16, data compiled by Bloomberg show.

Tanes expects to receive a building permit for Is GYO’s part in the Istanbul Finance Center project in mid-February. “We would be able to complete it in 18 months after construction starts,” he said.

Is GYO reported 18.1 million liras ($7.5 million) in profit in the third quarter, down 72 percent from the same period a year earlier. The shares advanced 24 percent in Istanbul this year, outperforming a 15 percent gain on the Borsa Istanbul REITs index.

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