Will Erdogan's new housing project help him to win the election?
Turkish President Erdogan has announced a new social housing project to increase his votes before the election in 2023. Due to the real estate crisis in Turkey since last year, it has become very difficult to find a house for sale or rent. People are moving to other cities that are cheaper, or they have started living together instead of living alone. In such an environment, it is unknown if a project with long-term mortgage houses under very favorable conditions will help Erdogan to win the election.
????#TURKEY BRIEF: Will Erdogan’s #social housing project help him win the elections?— GercekNews (@newsgercek) September 16, 2022
????Turkish President #Erdogan announced the largest social housing project in the country's history.
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The project, called “My First Home, My First Workplace,” announced by President Erdogan with the slogan of “the largest social housing project in the history of the country,” has three sections: a house for low-income people, land for construction, and a cheap workplace. With the project, it is aimed to deliver 250,000 residences, 100,000 lands, and 10,000 workplaces in all provinces. The first phase of the project, which is carried out by TOKI, the institution responsible for social housing construction in Turkey, is expected to be completed in two years. The total investment cost was announced as 900 billion TL ($49.2 billion).
What are the Terms of the Project?
• The monthly household income must be less than 18,000 TL ($985) in Istanbul and 16,000 TL ($876) in other cities.
• The person and his/her family should not have any housing.
• 10 percent will be paid in advance and the remainder will be paid in 240 monthly installments.
• The installments will be increased as much as the civil servant salary increase.
• 2,280 TL ($124) installments are foreseen for houses worth 608,000 TL ($33,296) for 2 rooms and 1 living room.
• 3,187 TL ($174) installments are foreseen for houses worth 850,000 TL ($46,549) for 3 rooms and 1 living room.
• If the application is high, the participants will be determined by drawing lots.
• It will be given with a loan term of 10 years and interest-free.
• There will be detached parcels of 350 to 500 square meters.
• Lands worth 192,500 TL ($10,542) will be offered for sale in monthly installments of 1,604 TL ($87), and plots of 112,500 TL ($6,161) will be offered for sale in 937 TL ($51) installments.
• Businesses worth 350,000 TL ($19,167) will be sold in installments of 2,633 TL ($144) with a loan term of 10 years.
Real Estate Crisis in Turkey
The project aims to make low-income people homeowners under very favorable conditions. The recent real estate crisis in Turkey played a major role in bringing this project to the agenda. Due to the inflation in Turkey that exceeded 80 percent, people tended to buy real estate to protect their savings. This caused real estate prices to explode. According to the figures of Bahcesehir University's real estate price index “Sahibindex Housing Sale Market Outlook,” real estate prices in three major cities of the country increased in September by 238.8 percent in Istanbul, 203.3 percent in Ankara, and 180.4 percent in Izmir compared to the previous year.
In addition, the government of the country where there is a currency crisis is encouraging the sale of real estate to foreigners in order to increase the foreign exchange inflow to the country. So much so that foreigners who make a real estate investment of $400,000 can be granted citizenship. In addition, individuals and companies selling real estate to foreigners can benefit from the support given to exporters. Houses sold to foreigners, many of which remain vacant without being rented, also put pressure on house and rent prices to increase, as they reduce the real estate supply.
The explosion of the real estate crisis over the last year has caused much social turmoil. As disputes between landlords and tenants escalated, people had to change cities. Civil servants began to apply for transfers from big cities to other cities. While Turkey was in this real estate crisis, the project announced by the government attracted a lot of attention because of this. Within 48 hours after the project was announced, the number of applications exceeded 1.5 million.
An election investment?
General elections in Turkey are expected to be held in June 2023. Experts are of the opinion that the government wants to recover the support that has fallen in the elections with this project. The government of Recep Tayyip Erdogan, which has ruled the country since 2002, is in danger of losing its support in the face of the economic crisis that started in 2018 and peaked in 2021. The government, which wants to prevent this, wants to regain the lost votes with a giant social housing project. But there are objections as to whether the project is realistic.
Kemal Kilicdaroglu, Chairman of the main opposition party CHP, reacted to the project. Explaining that Erdogan implemented this project to raise money before the election, Kilicdaroglu accused Erdogan of financing the election with the money he collected from poor people. Stating that he wanted social housing to become widespread, Kilicdaroglu said that he was doubtful whether the project would be finished.
Erol Bektas, Deputy Chairman of the CHP Administrative and Financial Affairs, reminded that Turkey has entered the election process and an investment of around 900 billion TL ($49.2 billion) is envisaged for this project, which will equal almost half of the 2022 budget. Bektas stated that the project does not appeal to the poor and that the minimum wage is 5 thousand 500 TL ($301) and the hunger limit is 6,840 TL ($374). Bektas said, “This giant project, which was announced on paper before the election, is not applicable due to many issues such as financing. Considering the size of the project, the amount that the state will subsidize and transfer to the contractors is approximately 360 billion TL, ($19.7 billion)" he said.
Tolga Idikat, CEO of real estate firm Emlakjet, said that this project will not lead to a permanent decrease in housing prices. Idikat said, “According to July data, there is an increase of nearly 115 percent in construction costs. As long as these costs increase, it would not be realistic to expect a decrease in housing prices in the mass construction sector," he said.
Many economists reminded that TOKI, neither started nor finished many projects in the past. Economist Oguz Demir explained that TOKI's income sources will not be able to meet this project and it will put a great burden on the budget. "This is a project of selling dreams to win the election," said Demir.
Lecturer and Civil Engineer Dr. Ilhami Akkum estimates that TOKI's social housing project will have a limited impact on reducing price increases. Akkum said, "If you pump money into the market, both infrastructure and superstructure manufacturers win, but the money you pump into the market goes out after a while in this high inflation environment."