Interview: Avni Çelik

Interest rates in Turkey have dropped in recent years. How has this affected demand for housing loans? Do you expect growth in mortgages?

AVNI ÇELİK: Real interest rates are still quite high when compared to the average in the developing world. The interest rates for mortgage credit are not below 13-14%, making instalment payments high. For example, paying off the mortgage for an apartment via rental income takes more than 15 years, so purchasing with mortgage credit cannot be regarded as an investment tool. However, I expect that in time, interest rates will fall and the cost of mortgage credit will be on par with global standards.

Nonetheless, I would still recommend investors and others to buy apartments using credit, because the increase in housing prices exceeds the inflation rate. You can see this if you compare the housing prices of 2002 and those of today. However, there are two categories of housing prices: the Marmara region and the rest of Turkey. There is a dramatic difference in these prices. For example, in Istanbul it is very difficult to purchase an apartment that will require monthly payments below TL3000 (€1275), but in the rest of Anatolia, you can find accommodation for TL1000 (€425) per month or less. In cities like Ankara, Izmir, Adana and Samsun, it is unwise to buy housing using credit, but in Istanbul it remains a good option because of its high growth rate. For those above the middle-income average, it can be profitable to invest in real estate using a mortgage.

Has the lack of a master plan for Istanbul slowed the government’s $400bn urban renewal project?

ÇELİK: Istanbul unfortunately still lacks a master plan, although this is not an obstacle to realising the urban renewal project. Urban renewal is a local issue, requiring the attention to detail that a master plan cannot offer. Obviously, if there were a master plan, local rehabilitation projects would be carried out in harmony with the city plan, but local municipalities cannot execute a plan on that scale, busy as they are with the details of the renewal.

In connection with a master plan, greater communication between the metropolitan municipality and the local stakeholders is essential, such that the core competencies – laws and legislations – are set out at the metropolitan level. If the metropolitan municipalities would manage the renewal, coordinating the interactive relationship between local projects and the other parts of the city plan in terms of transportation and other infrastructure, they could bring greater harmony to the city’s transformation.

What are the advantages of mixed-used projects, and how profitable are they?

ÇELİK: Mixed-used projects are definitely more profitable than other types of developments, but it is not logical to establish these projects without any regard to location. The mixed-use model has to be able to utilise all of its components to succeed, so the shopping malls, recreational facilities and hotels must all be profitable. Additionally, these projects may not be suitable for city centres, as these areas could likely be more profitably used for residential construction. On the other hand, it is easy to sell mixed-use projects to the public.

What is your projection for growth in the real estate market? How do your expectations differ for Istanbul compared to the rest of Turkey?

ÇELİK: The real estate market in Turkey is bound to grow, on account of the large youth population. The 15-24 age bracket numbers some 12.5m, while the 25-34 age group is around 12m. The value of mortgages in Turkey reached $70bn in 2011, or about 5% of GNP. In the EU countries, this figure averages around 59%, so there is a significant gap between these two markets. Turkey will eventually get to that point, but in the meantime, real estate demand will continue to increase rapidly, particularly in Istanbul.