In Turkey, as elsewhere, inflation is making life very expensive for everyone. Inflation recently reached 79 percent, the highest level in 24 years. This figure’s leading factors include residential property prices and rental rates. Declining supply in recent years (particularly during the pandemic), policies that boost demand in Turkey, rising production costs (a negative supply shock), and rising demand are thought to be the primary causes of this surge.
For example, the CBRT Residential Property Price Index (RPPI) has reached 430.60 in May 2022. In 2017, this figure was 100. The annual RPPI inflation rate is 145.5 percent YOY as of May 2020. (year-over-year). In comparison, the inflation-adjusted real-terms growth in residential property prices is 41.1 percent year on year. Real-terms growth, in particular, is roughly in line with figures from the United States and Europe.
The rental rates are the same. Rental prices have risen by 300-400% in some areas of southern Turkey, and by 200-300% in some neighborhoods of Istanbul. According to Endeksa, a private realtor, rental rates in Mula, a southwestern tourism hub, are up by 73 percent (reaching 15,000 TL) as of June 2022; in Antalya, by 310 percent (10,400 TL); and in Istanbul, by 168 percent (8,100 TL).
Of course, soaring property prices and rental rates, like the ongoing global inflation problem, are a global issue today. Many European and North American economies are facing new rounds of property crises and unprecedented price hikes in various forms, including the United States, the United Kingdom, and many European and Asian economies such as China. Turkey is an outlier today, with relatively higher internal and external (exchange rate) inflation and a relatively higher price surge.
According to the Presidency of Migration Management, the overall number of non-Turkish nationals and immigrants in Turkey is 5.5 million. Included in this number are Syrians who have been granted TPS, making Turkey one of the world’s top destinations for refugees. However, rising anti-immigrant sentiment has accompanied extremely high inflation and sharp increases in home prices. In particular, immigrants have become the scapegoats for the country’s economic woes, including price hikes and high unemployment.
Less to do with immigrants or refugees, the recent inflation and soaring property prices in Turkey are the result of supply shocks and cost-related external factors like rising energy prices, disrupted supply chains, and food prices, as well as expansionary policies that boosted demand for property and exchange rate fluctuations.
However, immigrants contribute very little to overall demand and the resulting inflationary pressures. Instead, they fill a critical demand in a wide range of low-skill industries that the average Turk would look down on. They allow Turkish factories to compete with those in China and India in terms of labor costs. Immigrants and refugees, contrary to popular thought, can provide a country with much-needed labor and human capital.
In September 2021, 1 US dollar was worth around 8 Turkish Lira, yet by October 2022 this has lept to nearly 19.
One of the main consequences of this devaluation is inflation