Real Estate Turkey’s real estate proposal: turn gold into bricks By William Sellars October 9, 2024, 11:12 AM Reuters From bracelets to buildings: the proposal suggests selling gold directly to the central bank Estimated $400bn of gold ‘at home’ Proposal to sell to Central Bank Gold provides best returns A senior business leader in Turkey has proposed a radical plan to encourage Turks to take the gold bullion hidden under their mattresses and convert it into real estate. However, many people may be wary of exchanging a solid gold asset for the uncertainty of the country’s property market. With the precious metal appreciating strongly over the course of 2024 to record highs in September, and with forecasts of further gains in October because of the Middle East security situation and the outcome of the US election, many analysts advise against selling. However, Erdal Bahçıvan, the president of the Istanbul Chamber of Industry, on October 7 put forward an alternative option, one that proposes turning bullion into buildings. Under his proposal, citizens would sell their gold directly to the Central Bank, paying for between 20 and 30 percent of the cost of a property. The state would then offer housing loans at subsidised rates for a term of 10 to 15 years. The result would be a strengthening of Central Bank reserves, a broadening of housing stocks and the national asset base and a flow of capital into the economy, Bahçıvan said in comments widely covered by local Turkish media. Estimates put the stock of “mattress gold” at up to $400 billion, representing more than 33 percent of national GDP. Unlocking even a fraction of this asset holding, under the conditions proposed by Bahçıvan, could stimulate the construction and housing market, according to at least one expert. Until recently housing sales and prices fell in many regions because of a tailing-off in demand resulting from state austerity measures and a tightening of credit. In that environment, such a scheme could have an appeal, said real estate economist Dr Ahmet Büyükduman. “There is already movement in sales, with the increase in housing prices now below the inflation rate,” Büyükduman told AGBI. “Real housing prices went backwards and hit rock bottom. Will it make a swing back from here? I expect so and, in this respect, it is logical that those investing in real estate will see this as an opportunity as purchase prices are low but rents remain very high.” Turkey targets $10bn FDI in 2024 on Saudi support Opinion: gold has returned to its ancient role as a classic hedge Turkey SMEs bolstered by $2.3bn global funding Many in Turkey, however, may be cautious of re-entering the real estate market through giving up their gold. On October 8, state statistics agency Turkstat issued its latest data on real profits generated by investment instruments. The report showed gold as the most reliable asset in terms of earnings growth this year. Taking the Turkish consumer price index into account, gold appreciated 14.27 percent over the past year, compared with a 19 percent loss on the local stock exchange and a 15 percent fall taken on interest-bearing deposits. While Büyükduman said continued high rental charges could result in an investment property paying itself off within 13 years, a gold-funded surge in construction could flood the market, weakening returns. Turkey’s mattresses may remain lumpy for some time to come.
