Housing finance in high and uncertain inflationary environments: |(a Turkish case)

Abstract

Today, one of the main problems of the countries facing high and volatile inflation is not to manage to establish the model for housing finance. The implementations of classical housing finance systems applied in the developed countries cannot succeed in high and volatile inflationary environments. The studies that are carried out in the countries facing high and volatile inflation formed the common basis of the suitable housing finance model for house buyers, investors and governments. The suitability criteria for the participants of housing finance are specified by the help of literature survey conducted for this purpose. The contradictions between the suitability criteria of the participants cause difficulties for housing finance. Being an alternative mortgage tool, Dual Index Mortgage Credits remove the contradictions between the participants suitability criteria. But the use of Dual Index Mortgage Credits is not sufficient enough to create new resources for housing finance. Securitization of the mortgage credits is the only possible way to create new resources for the housing finance sector. A suitable housing finance model is proposed at the end of this thesis study. The model gives access to DIM credits for house buyers and afterwards creates new resources for housing finance by the use of securitization. The model not only provides the house buyers affordable payment opportunities but also offers real interest rates to investors. It is observed that the model works perfectly in high and volatile inflationary environments, but two important factor could effect this perfection. These are falling real wages and timing mistakes in index adjustments.