Housing demand in Turkey continues to rise while supply continues to lag, causing real estate prices to rise and purchasers to be squeezed out.
Individual buyers and investors are driving strong demand, hoping to profit from the hot property market as well as the increasing population. But because there aren’t enough houses, prices have gone up, and locals can’t find houses to rent or buy that aren’t too expensive.
Add to that the fact that construction permits are still low, even though there has been a small uptick after a drop in 2019. This is because builders are dealing with limited supplies and rising costs of materials.
Despite high borrowing rates and rising prices, residential property sales have been increasing. The demand for housing in Turkey is believed to have reached 800,000 units per year, compared to a supply of roughly 550,000 units.
According to industry participants, the primary causes of decreasing real estate output are rising expenses, land prices, and economic volatility.
Even though the need for new building licenses is growing as we get closer to 2019, Nazmi Durbakaym, the head of the Istanbul Constructors Association (INDER), said that there has been a big drop in the past three years.
“The applications for building permits, which dipped to 319,000 in 2019, increased to 550,000 in 2020 and to 710,000 in 2021. The number of apartments that were granted permits has reached 1.58 million over the last three years, while the required number of production units totaled 2.4 million,” Durbakayım stated.
“The supply has lagged far behind the demand.”
So far this year, rising house prices and rental rates have sounded the alarm. In addition to the steps announced earlier this month to stop real estate prices from going up, the government has said it will take action.
Official figures reveal that Turkey’s residential property price index (RPPI), which measures quality-adjusted price fluctuations in dwellings, increased by 110 percent in nominal terms in March.
On an annual basis, the indicator increased by 96.4 percent in February.In January, the rise was 77.5 percent, and in December, it was 59.7 percent. A year ago, the indicator increased by 32% year on year.
The increase comes at a time when inflation is on the rise. In April, energy and commodity prices helped push inflation to a 20-year high of about 70%.
The Turkish Statistical Institute reported that the construction index increased by 102 percent year on year in March (TurkStat).
Even though interest rates on loans are high and prices are going up, the number of houses sold in Turkey in April was nearly 40% higher than the same month last year. This is because people continue to see real estate as a good way to invest to protect themselves from inflation.
Sales increased by 26.2 percent from January to April, totaling 453,121 homes.
Cheaper house loans will be granted to people who convert their foreign cash holdings to Turkish lira or sell their gold to the central bank under a program unveiled by President Recep Tayyip Erdoan earlier this month.
To bolster the Turkish lira, Ankara has urged people and businesses to transfer their foreign exchange savings to lira, and in December it announced a plan to promote lira deposits by safeguarding them from exchange rate volatility.
The new policy on house loans, according to Erdoan, will boost this endeavor by reversing a years-long dollarization trend.
Construction companies will be given loans to finish some projects if they commit to keeping sale prices the same for a year.
Erdoan says that the credit package for building companies is meant to increase the number of homes on the market and bring prices back into balance.
According to Durbakaym, the alternative support package has lowered the interest burden of individuals in need of housing, which he believes will make it easier to obtain accommodation.
Ege Yap Chairperson Inanç Kabaday emphasized the supply-demand mismatch that arose as a result of the coronavirus outbreak.
According to Kabaday, the new packages will provide a considerable incentive for real estate development.
“With such steps taken to stabilize this imbalance as soon as possible, the supply will increase rapidly. In addition, encouraging new projects to be started with cost-effective loans will also increase the production of new housing,” he noted.