2022 Surge in Turkey's Real Estate Prices: Decoding Growth Factors

Unveiling the Surge in Real Estate Prices in Turkey: Decoding the Factors Behind the 2022 Growth

Unveiling the Surge in Real Estate Prices in Turkey: Decoding the Factors Behind the 2022 Growth

The escalation in demand for real estate across Turkey, particularly Istanbul, has ushered in a noteworthy surge in property prices. Despite the Turkish lira's depreciation and global inflation, the real estate market continues to flourish. This phenomenon prompts us to explore the underlying catalysts for this rise, ensuring a sustainable trajectory for the future.

Past Actions Yield Present Outcomes

As the renowned foreign investor Will Rogers aptly stated, "Don't wait to buy real estate. Buy real estate and wait." This adage underscores the ever-evolving opportunities in real estate, urging prompt action. Many prospective investors who interacted with real estate agents in the latter half of 2021 are now facing price hikes of up to 70% within nine months. The shift begs the question: What has transpired to so markedly impact real estate prices?

Unearthing the Reasons

To comprehend the price escalation, we delve into two critical aspects: the exchange rate and building materials.

Exchange Rate Dynamics:

The fluctuations in the Turkish lira against the US dollar significantly influence property prices. While the lira's depreciation against the dollar initially had limited impact on property rates, a gradual adjustment was inevitable. This localized market doesn't instantaneously mirror currency shifts. Additionally, the COVID-19 pandemic and its economic ripples deferred the expected price hike.

Building Material Influence:

Turkey, though a construction material exporter, imports crucial components such as iron and cement. The surge in material costs—80% for iron and 25% for other materials by mid-2021—impacts ongoing and upcoming projects alike. This cost burden cascades to ready-to-move properties, bridging the gap between new and resale prices.

Rental Returns Amplify the Trend:

Rising property prices are often attributed to increased rental yields. However, the reverse holds true: elevated rental income bolsters property valuations. Turkey, including Istanbul, witnessed a sharp rental spike of over 120%, validating the price upswing. This trend aligns rental returns with property value, ensuring a balanced market.

Supply and Demand Dynamics:

The aftermath of the pandemic disrupted new project initiatives, amplifying demand over supply. Scarcity of suitable construction land near essential infrastructure further propels demand, raising land values even before development commences.

Economic and Political Impacts:

Inflation rates and the US Federal Reserve's forthcoming interest rate hike provoke currency depreciation globally. The pandemic's lingering effects on manufacturing and supply chains inflate costs, including construction expenses. The recent Russia-Ukraine conflict drives up oil prices and sways investors towards secure real estate holdings.

Forecasting the Path Ahead:

While these factors substantiate the recent price escalation, their influence on future prices is pivotal. Monitoring these determinants and their prolonged effects offers insights into the trajectory of Turkey's real estate market. To navigate these dynamics and glean insights from our Property Experts, seize the opportunity for a free consultation.

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