December 10, 2018

Turkish lira to be used for all real estate transactions

turkish lira

President Recep Tayyip Erdoğan signed a decree on Thursday Sept. 13 that requires using the Turkish lira for buying, selling and renting of real estate, in a fresh step to support the ailing local currency.

The decree as published states “Purchase, sales and rental contracts of moveable and immovable properties and vehicle leasing made in foreign currencies will be converted into lira within 30 days”

It added that in the current contracts, the agreed prices in foreign currencies will be redefined as lira within one month and the terms of the decree will be executed by the Finance and Treasury Ministry.

On Aug. 29, Treasury and Finance Minister Berat Albayrak said the government would take steps to prevent foreign currencies from being used for real estate rentals and sales.

The new decision on transactions also included contracts for business and services. The contracts cannot be agreed in foreign currency or indexed to a foreign currency, according to the Official Gazette.

It was the latest in a series of steps Turkey has taken since August to choke dollar demand. The central bank has launched a forex swap market for banks, while the banking watchdog limited derivative transactions. It has also required exporters to convert the majority of their overseas revenue into Turkish lira.

turkish lira

 

The central bank on Thursday 13th raised its benchmark rate to 24 percent in the biggest such hike in President Tayyip Erdogan’s 15-year rule. On Friday, the lira stood at 6.0342 to the dollar at 0728 GMT. The lira’s implied volatility gauges also fell to their lowest in more than a month, as sentiment around the currency continued to improve.

The bank’s decision came hours after Erdogan, who declares himself an “enemy of interest rates”, reiterated his opposition to high interest rates and blamed Turkey’s high inflation on the steps taken by the central bank.

With Thursday’s rate hike, the bank has now raised interest rates by 11.25 percentage points since late April in an attempt to prop up the ailing Turkish lira. Key rates now stand at their highest level since 2004, around a year after Erdogan first came to power.

Late on Thursday, Finance Minister Berat Albayrak told pro-government newspaper Sabah that the central bank’s move had put an end to any discussions about the bank’s independence, and said Turkey would unveil its medium-term economic program on Sept. 20.

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