Turkey rules property rent, sales must be made in lira

Erdogan bans sale, rent of property in foreign currencies in attempt to prop up collapsing lira.

ANKARA - President Recep Tayyip Erdogan on Thursday ordered by decree that property agreements must be made in Turkish lira, in a new bid to prop up the beleaguered currency.

In the decision published in the official gazette, Erdogan ruled contracts for the sale, rent and leasing of property in or indexed to foreign currencies would not be allowed.

Current agreements in foreign currencies must be changed within 30 days, it said.

Rental and sale agreements are often conducted in foreign currencies in the retail sector, and also to foreigners living in Turkey.

There may be exceptions decided by the treasury and finance ministry headed since July by Erdogan's son-in-law and ex-energy minister, Berat Albayrak, the decree added.

The move comes after the lira's drastic fall in value against the US dollar last month during one of the worst diplomatic rows between NATO allies Washington and Ankara.

The US hit two Turkish ministers with sanctions over the detention of an American pastor and President Donald Trump doubled steel and aluminium tariffs on Turkey.

The Turkish currency lost nearly a quarter in value against the greenback in August.

But there had been fears over the health of the Turkish economy -- which economists say is heading for a recession after a slowdown in the second quarter of 0.9 percent compared to 1.5 percent in the first quarter of this year.

There is also alarm over the direction of monetary policy under Erdogan who has railed against interest rates as "the mother and father of all evil".

'Mother and father'

Erdogan believes high rates equals high inflation, going against economic orthodoxy. But inflation continues to rise, reaching nearly 18 percent in August.

Erdogan sharply criticised Turkey's Central Bank on Thursday for taking "wrong steps" over inflation and repeated his opposition to high interest rates, shortly before the bank was due to announce a rates decision.

"If you say inflation is the cause and interest rates are the result, you don't know this business," Erdogan said, adding that he had not once seen the bank correctly forecast inflation.

"We've been in this business for 16 years. Will we not learn? You may determine interest rates, but inflation is a result of the wrong steps you (the central bank) have taken," he said. "And who pays the price? The people," the president, whose AK Party first won power in 2002, told a traders' confederation.

The lira, which was largely flat in early morning trade, fell more than 2.5 percent after Erdogan's comments beyond 6.5 lira to the U.S. dollar, before recovering slightly.

The president, who has described the lira depreciation as an economic war, said the currency was experiencing "fake volatility" and that Turkey's recent troubles were the result of manipulation.

Erdogan won an election in June which granted him sweeping new presidential powers, fuelling concern that he was taking tighter charge of the economy and of monetary policy.

In his speech on Thursday he said Turkey was "on the side of the free market economy" and would not deviate from that free market framework, while making clear that he was in overall control.

"Difficult times require difficult decision to be taken and implemented," he said. "All of our institutions, namely our economy management, are working day and night under my coordination as president."

He also criticised private banks, saying some had increased their interest rates up to 50 percent - more than double the Central Bank's benchmark rate of 17.75 percent. "How can the private sector invest in such high interest rates?" he asked, adding that such margins were made only by drugs dealers.

Turkey's central bank is expected to raise interest rates on Thursday to support the lira and rein in inflation which hit its highest in almost 15 years in August.

According to a Reuters poll, the benchmark rate is expected to be increased by between 225 and 725 basis points. Analyst forecasts for the scale of the increase vary widely, as the bank balances concerns over the lira weakness with worries about an economic slowdown.