Rapidly increasing prices for real estate in Turkey have had investors wondering what is happening. The price rise is fueled by many factors, including high inflation, a weakened local currency, a bullish property market, local population growth, and internal and foreign migration. This blog will highlight some key factors leading to price hikes in real estate in Turkey.
Influx of Buyers
Turks are turning to real estate to protect their savings from inflation. Turkish house sales rose by 20.6% in March 2022 to 134,170 houses (Turkish Statistical Institute). Opportunities for low-interest mortgages are also making it more possible for first-time buyers to enter the property ladder. Savvy foreign investors looking to take advantage of real estate for citizenship programs and the depreciating Lira against currencies like the Euro have also added to the demand.
Sales to foreigners rose 31% in March 2022, according to the Turkish Statistical Institute, and foreign purchases of Turkish real estate have continuously been breaking records as more and more foreigners discover the beauty of investing in Turkey. Most European countries also face an economic crisis, alerting many people to invest in real estate elsewhere.
Increase in Material Prices
Slower construction activity due partially to the pandemic means only 500,000 new homes have come onto the market annually in the past three years. It is a considerable reduction compared to the yearly demand of 1 million homes. Adding to the fray, construction costs are up due to imported raw materials like iron and cement against the weaker Turkish Lira. Construction companies are finding it hard to keep up with the prices of materials they buy outside of the country, slowing down construction. Turkey has many positive aspects that keep attracting foreign buyers, which include high return on investment (ROI), exemplary standards of living, and magnificent and modern properties. Read more on property investment in Turkey.
Disruption in the Supply Chain
The global supply chain was disrupted by Covid-19. This supply shortage has significantly impacted the price increase of new homes in the country. Additionally, less suitable land is available for new builds, and land is being sold at a premium, adding to costs before construction begins. Developers are forced to pay at top market rates and pass those costs to consumers.
Residential Property Prices Indices
Residential Property Prices Indices (RPPIs) are index numbers that measure the rate at which residential properties purchased by households change over time. Turkey's RPPI soared an annual 96.4% in February 2022, surging against a background of rising inflation. Nearly a year ago, the index's annual rise was 32%. Potential homebuyers should act quickly with the expectation that the prices will go up further.
Please read our blog on why you should invest in Turkey now.
The property sector, in general, is a solid investment. While no one can predict the future real estate sector trends in Turkey, prices will continue to rise to make now the best time to invest and not lament missed opportunities.