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

  • 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)

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

Order Information: Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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  1. 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.
  2. John Y. Campbell & Joao F. Cocco, 2003. "Household Risk Management and Optimal Mortgage Choice," NBER Working Papers 9759, National Bureau of Economic Research, Inc.
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  4. 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.
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  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. Peter J. Elmer, 1992. "PLAM Default Risk," Journal of Real Estate Research, American Real Estate Society, vol. 7(2), pages 157-168.
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