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Housing Policy and Mortgage Finance in Turkey During the Late 1990s Inflationary Period

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Author Info

  • Isil Erol

    () (Department of Land Economy, University of Cambridge, Downing College, Regent Street, CB2 1DQ, Cambridge, England)

  • Kanak Patel

    () (Department of Land Economy, University of Cambridge, 19 Silver Street, CB3 9EP, Cambridge, England)

Abstract

This paper evaluates the Turkish government’s housing policy for financing the public sector housing and examines the desirability of wage-indexed payment mortgage (WIPM) contract from the lenders perspective. The WIPM contract introduced in 1998 differs from the standard index-linked mortgages in that it is based on the Civil Servant’s Wage Index and there is no amortization rate. From the lender’s perspective, the WIPMs are found to be desirable mortgage instruments in periods of persistent high inflation because they eliminate the real interest rate risk and credit risk of the ARM and the ‘wealth risk’ of a nominal FRM.

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Bibliographic Info

Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 7 (2004)
Issue (Month): 1 ()
Pages: 98-120

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Handle: RePEc:ire:issued:v:07:n:01:2004:p:98-120

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Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Web page: http://www.asres.org/

Order Information:
Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
Email:
Web: http://www.asres.org/

Related research

Keywords: housing policy in inflationary economies; civil servant’s wage-indexed payment mortgages (WIPMs);

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References

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  1. Joao Cocco & John Campbell, 2004. "Household Risk Management and Optimal Mortgage Choice," Econometric Society 2004 North American Winter Meetings 646, Econometric Society.
  2. Statman, Meir, 1982. "Fixed Rate or Index-Linked Mortgages from the Borrower's Point of View: A Note," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(03), pages 451-457, September.
  3. Peter J. Elmer, 1992. "PLAM Default Risk," Journal of Real Estate Research, American Real Estate Society, vol. 7(2), pages 157-168.
  4. James B. Kau & Donald C. Keenan & Walter J. Muller & James F. Epperson, 1990. "The Valuation and Analysis of Adjustable Rate Mortgages," Management Science, INFORMS, vol. 36(12), pages 1417-1431, December.
  5. Taewon Kim, 1987. "A Contingent Claims Analysis of Price Level-Adjusted Mortgages," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(3), pages 117-131.
  6. Beaglehole, David & Tenney, Mark, 1992. "Corrections and additions to 'a nonlinear equilibrium model of the term structure of interest rates'," Journal of Financial Economics, Elsevier, vol. 32(3), pages 345-353, December.
  7. Robert Shiller, 1998. "Indexed Units of Account: Theory and Assessment of Historical Experience," Working Papers Central Bank of Chile 28, Central Bank of Chile.
  8. Hakan Berument & Kamuran Malatyali, 1999. "Determinants of interest rates in Turkey," Discussion Papers 9902, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  9. Titman, Sheridan D & Torous, Walter N, 1989. " Valuing Commercial Mortgages: An Empirical Investigation of the Contingent-Claims Approach to Pricing Risky Debt," Journal of Finance, American Finance Association, vol. 44(2), pages 345-73, June.
  10. Gibson, Rajna & Schwartz, Eduardo S, 1990. " Stochastic Convenience Yield and the Pricing of Oil Contingent Claims," Journal of Finance, American Finance Association, vol. 45(3), pages 959-76, July.
  11. Arthur L. Houston, 1988. "A Comparison of the Reinvestment Risk of the Price Level Adjusted Mortgage and the Standard Fixed Payment Mortgage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(1), pages 34-49.
  12. Gerald Buetow, Jr. & Joseph Albert, 1998. "The Pricing of Embedded Options in Real Estate Lease Contracts," Journal of Real Estate Research, American Real Estate Society, vol. 15(3), pages 253-266.
  13. Kau, James B, et al, 1992. "A Generalized Valuation Model for Fixed-Rate Residential Mortgages," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(3), pages 279-99, August.
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