A tragedy for Ukraine, a housing crisis for Turkey
With rents soaring and house prices skyrocketing amid a surge of foreign buyers – especially those fleeing war in Ukraine – Turkey is on the brink of an affordable housing crisis. Unless government controls are instituted, the social, political and economic implications for the country will be profound.
Data shows that the Turkish real estate supply chain is broken. According to Housing price index prepared by the Turkish central gank, the price of buying a house in Turkey has increased by 96% since February 2021. In Istanbul, it has jumped by 106%.
Other studies paint an equally dire picture. Housing Market Study published in April by Bahcesehir University’s Center for Economic and Social Research estimated the annual increase at 134%, while the latest Eurostat study housing price index estimated that the annual increase in house prices was 60% in Turkey, six times the European average.
With an annual 142% inflation rate, the Turkish lira unable to recover since losing 40% of its value in 2021, and foreign investors flooding the market, Turkish citizens are increasingly less likely to find affordable housing in their own country. As a result, many Turks are moving out of city centers or being forced into deeper debt.
The lure of citizenship and easy regulations have made properties priced in Turkish Lira more attractive than ever to foreigners. Buying a property worth US$250,000 automatically entitles it to a Turkish passport. Between 2017 and 2019, home purchases by foreigners more than doubled to nearly 46,000 units, with Iranians and Iraqis being the most frequent buyers.
But last December, sales at foreigners jumped almost 50%, and many of the new buyers are Russians and Ukrainians fleeing the conflict. Viewing this trend as an opportunity rather than a tragic ripple effect of war, in April the Turkish government raised the citizenship threshold to US$400,000.
Due to the Covid-19 pandemic, construction has stalled leading to a shortage of properties to buy. The economic crisis has led to an increase in the price of building materials such as cement, further slowing the construction of new homes.
As private and public banks provide housing loans of 120 to 240 months with an interest rate of between 1.2% and 1.8%, housing prices have accelerated due to increased demand and d lack of supply. The average monthly salary in Turkey is 7,830 lira (about $530), which is not enough to get a home loan and barely enough to pay rent.
For most Turks, buying a house is out of the question, but renting is just as problematic. The average rent increase so far in 2022 is 19.6%. To put this into context, rents had only increased by 1.3% in the European Union at the end of the fourth quarter of 2021. With laws strongly favoring landlords, Turkish tenants have been cornered.
Across the country, landlords and businesses are enjoying flexible regulations and raising rents as they see fit; many are doing just that amid the flood of new buyers from Russia and Ukraine.
Additionally, landlords are looking to rent out their properties to foreigners. A recent advertisement for a rental property in Esenyurt of Istanbul explicitly stated that the property was “not suitable for rental for Turks”.
In 2021, an average two-bedroom apartment in the Atasehir district of Istanbul cost 3,500 lira per month (about $240). Now it costs 9,000 lira. Similarly, before the war, rental in Antalya, a coastal city frequented by Russians, was around 2,500 lire per month. Now it’s hovering around 10,000.
And yet, as outrageous as these increases are and as angry as Turkish citizens have becomeTurkish property laws fail to limit the astronomical increases.
Landlords are evicting current tenants to make way for those who can pay more. By law, landlords are supposed to keep annual rent increases in line with the Consumer Price Index rate, which was above 15% in 2021. increase rents beyond that ceiling and evict a tenant. after 10 years without explanation.
Tenants who cannot afford rent increases risk being evicted. Unsurprisingly, housing disputes clog up Turkish courts, and about 20% of all new cases are related to housing disputes.
Of course, the war is not the only cause of the housing crisis in Turkey. As the pandemic winds down and Turkey is an affordable destination, tourists are flocking to the country and landlords are opting for short-term leases through platforms such as Airbnb. Half of these rentals are based in Istanbul.
Unlike many parts of Europe, which have Airbnb restricted to protect housing stock, opportunistic landlords in Turkey can do whatever they want. But with no regulations, taxes or restrictions on these day rentals, the lack of government oversight hurts the average citizen.
Systematically, Turkey excludes its own citizens from the housing market. With a certain 52% of Turks in debt and four in 10 having taken out a loan from a family member in just the last three months, one of life’s basic needs, housing, becomes an almost impossible burden. To reverse this trend and protect Turkish citizens, the government must intervene.
Some increase in house prices and rents may have been inevitable, but the pain it imposes can be mitigated. While those fleeing conflict in Ukraine need shelter, leaders must also consider who is displaced in the process of providing one.
This article was provided by Syndication desk, who owns the copyright.