Government Interventions in the Turkish Mortgage Market: Housing Support Schemes

Many government policies in housing markets aim to encourage homeownership and raise affordability. However, conflicting outcomes of government interventions suggest that such policies may lead to uncertainty, as well as irrational and strategic behaviours, contrary to initial expectations. The Turkish government initiated two housing support schemes in 2020 and 2022. To explore the impact of housing support schemes on the probability of mortgage-financing in house sales transactions, this study applies difference in differences and an event-study method on a novel transaction-level dataset covering all full share apartment unit sales across the country. The 2020 scheme produced a large shift in the extensive margin of credit use (71.5 percent relative increases on average across the country) while the 2022 program generated a substantially smaller increase than that of the 2020 scheme. This study argues that government interventions in mortgage interest rates have a boosting effect on the mortgage market and market liquidity. However, the primary objective and the target population of such policies need to be clearly defined, and they must be tailored to reflect local and sector-specific conditions in order to be effective. Otherwise, the results might be inconsistent with the initial anticipated impacts.