Turkey implements new loan restrictions for second home buyers

Turkey's banking watchdog has introduced new loan restrictions for individuals looking to purchase their second homes in a bid to stabilize the housing market and ensure financial prudence among lenders and buyers.

According to an announcement on the web site of the Banking Regulation and Supervision Agency (BDDK), coordinated macro-prudential measures have been set in place in an effort to bolster financial stability. These measures are specifically for those buying a second or subsequent property. If the buyer, their spouse, or their children under the age of 18 already own at least one property, the loan-to-value (LTV) ratio for home loans will be tightened by 75%.

This means that for a house valued at 5 million TL, individuals who intend to purchase it as their second property can only be sanctioned a loan up to 22.5% of the property's value.

Furthermore, for these individuals, the residential property loans secured by mortgages will now be subjected to a higher risk weight. Instead of the usual 35% risk weight applied in capital adequacy calculations (calculated using the standard approach), a heftier 150% risk weight will be implemented.

However, for those purchasing their first homes, there will be no changes to the current loan-to-value ratios. The new rules are clearly aimed at controlling potential real estate bubbles and ensuring that banks maintain strong capital positions amidst growing concerns over housing affordability and household debt.