Subsequent to the interest rate reduction practices of the Central Bank of Turkey and the special call of the President, banks have reduced especially the mortgage interest rates. The real estate sector is expecting more of this development that has brought dynamism in housing demand. Turkey has experienced many events such as two general elections within the same year and been exposed to many shocks such as terrorist attacks carried out by PKK, DAESH and FETÖ terrorist organizations and the jet crisis with Russia. However, the country succeeded to go through these bad times without reflecting them on growth figures too much in the past two years. It is been estimated that the effects of the problems experienced in 2016 summer on the economic balances will be short-term and relatively small-scale just as the previous ones. The large reform agenda carried out by the Government in order to improve the savings, investment environment, industrial production and export has been an important reason for these optimistic expectations. The Central Bank of the Republic of Turkey (TCMB) has made significant reductions in the upper band of the interest rate corridor as of March. These steps which relieved the markets were followed by the reduction in the required reserve ratios. As the banks responded to the call made by President Recep Tayyip Erdoğan and the Government to the banks aimed at reduction in the mortgage interest rates in order to revive the real estate sector - which has an indirect effect on about 300 industries - the optimistic mood had also reflected on the housing sector. All these developments are being evaluated positively in terms of neutralizing the effects of the political developments on the markets within a short period of time. The reliance on the Turkish economy and stability is continuing. GLOBAL MONETARY POLICIES ARE WORKING IN FAVOR OF TURKEY The expansionary monetary policies in global markets are also supporting the environment needed for the reform agenda of the Turkish economy. As a result of dollar getting strong in global markets due to the interest-rate hike process of FED in 2015 and capital outflows in emerging economies, tightening was carried out in the monetary policies practiced in these countries. After the rise in interest rates, the expectation of FED to carry out an additional interest-rate hike is weak. On the other hand, the Central Bank of England tended towards interest rate reduction and additional wage incentive policy after the Brexit decision. Similarly, the European Central Bank and the Central Bank of Japan are continuing wage incentive policies. Therefore, expansionary monetary policies in global markets are providing an environment for the interest-rate reduction in Turkey. BANKS ARE REDUCING INTEREST RATES; CONSUMER CONFIDENCE IS INCREASING According to the House Sales Statistics announced by TUİK (Turkish Statistical Institute); house sales in Turkey in July 2016 decreased at the rate of 15.8 compared to the same month of the previous year. Nevertheless, the steps taken within the frame of both the economic data and the monetary and fiscal policies can eliminate this limited decrease. The liquidity move that the Central Bank of Turkey has created in banks in the last 8 months by making a reduction of totally 225 basis point at the upper band that it funds the markets on a daily basis has also reflected positively on the housing loans within this period and banks have reduced the interest rates one by one. On the basis of the calls made, totally 10 banks have reduced housing loan interest rates. On the other hand, according to the Consumer Confidence Index data in August, the consumer confidence index has reached 74,4 percent with an increase of 11.1% compared to the previous month. This is an important data showing that consumer confidence is preserved. Therefore, we can tell that the strong demand in the market is preserved for the increase in the housing sector. THERE IS AN INCREASE IN HOUSING DEMAND, BUT IT’S NOT ENOUGH After the banks have reduced the housing loan interest rates below 1 percent (psychological limit) in the first phase, there has been an increase in the number of applications for mortgage loan. As Ziraat Bank, Vakıfbank, Halkbank and İşbank have reduced 120-months term mortgage interest rates down to 0.95 percent, there has been a significant increase in the number of applications for mortgage loan. The real effect of all these on the house buyers is expected to be seen by the end of the summer season- at the beginning of the last quarter of the year. The expectation that the increase will rise further with delay can be related with the economic recession in the domestic market due to the summer season and postponing expectations until the 10-day holiday of Sacrifice Feast. On the other hand, there is a high expectation about a certain amount of reduction in the loan interest rates in the following period. Many consumer organizations and real estate sector representatives are emphasizing that the reduction made in the mortgage interest rates carried out by the banks is not enough and should be continued. There is a common opinion that people will take action to buy houses and the sector will revive more in case that the interest rates would be reduced to around 0.70 percent. In other words, the real estate sector is highly optimistic about the upcoming period and is emphasizing that the necessary steps should be taken and the consumer supports should be continued for this. THE SECTOR IS ALSO TAKING ON RESPONSIBILITY The Association of Real Estate and Real Estate Investment Companies (GYODER) has initiated the “Collaboration in Real Estate for a Stronger Turkey” campaign in 1st of August in order to support economic growth and accelerate the sector and is providing consumers about 60,000 houses and 3200 offices with 10-year terms, 0.7 percent monthly loan interest and 20 percent down payment within the scope of the campaign, which has been extended up to 15th of October upon request, with the participation of 49 member companies. However, sector specialists are telling that the campaign will bring a serious cost for the sector and they are expecting “the banks to continue reduction in their interest rates and to relieve the charge and tax burden on the real estate sector”. The importance of reduction in especially the long-term interest rates such as 10-years is emphasized. The highest annual interest rate among countries, where mortgage system is applied, is 8 percent. In Turkey, this rate exceeds 13 percent together with the compound interest. Although the interest rates in 0-24 terms became low through the recent reductions, the lowest interest rate with 10-years term is currently 0.95 percent. Therefore, the interest rate seems like 11.4 percent annually at the present time, but it exceeds 12 percent together with the tax and other expenses and fails to satisfy the expectations of the consumers. IT DOES CONCERN ONLY THE HOUSING SECTOR, BUT ALSO THE COUNTRY’S ECONOMIC GROWTH Increase in liquidity in markets, particularly in real estate sector which is the locomotive sector of the country, through the interest rate reduction practice triggered by the policies of the Central Bank of Turkey can cause a decline in loan costs. A possible decline in the commercial loan interests of banks would enable exporters to have low-cost loans. This will create an increase in the investments in the national economy and a significant effect on export. In the final analysis, the estimation of 3.5 percent growth for 2016 is still valid. However, for this, the cooperation between the state, banking sector, private sector and consumers is important more than ever.