With a staggering increase in rents and home prices skyrocketing amid a surge of overseas buyers – particularly those fleeing the war in Ukraine – Turkey is on the verge 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 supply chain for Turkish property is broken. According to the Housing Price Index prepared by Turkey’s Central Bank, the price of buying a house in Turkey has increased by 96 percent since February 2021. In Istanbul, it has surged 106 percent.
Other studies paint an equally dire picture. Housing market research released in April by Bahcesehir University Center for Economic and Social Research put the annual increase at 134 percent, while Eurostat’s most recent housing price index estimated that the annual increase in home prices was up 60 percent in Turkey– six times the European average – and the largest increase in the EU.
With an annual inflation rate of 142 percent, the Turkish lira unable to recover since losing 40 percent of its value in 2021, and foreign investors flooding the market, Turkish citizens are increasingly unlikely to find affordable housing in their own country. As a result, many Turks are moving out of city centers, or are forced to go further into debt.
The allure of citizenship and easy regulations have made Turkish lira-priced properties more appealing for foreigners than ever before. Buying $250,000 worth of property automatically qualifies one for a Turkish passport. Between 2017 and 2019, home purchases by foreigners more than doubled to almost 46,000 units, with Iranians and Iraqis as the most frequent buyers.
But last December, sales to foreigners jumped nearly 50 percent, and many of the newest buyers are Russians and Ukrainians fleeing conflict. Seeing this trend as an opportunity rather than a tragic ripple effect of war, in April the Turkish government increased the citizenship threshold to $400,000.
Due to the pandemic construction has been stagnant causing a scarcity of properties to buy. The economic crisis has led to an increase in the price of construction materials, such as cement, further slowing the building of new homes. While private and public banks give out 120 to 240 month housing loans with an interest rate ranging between 1.2 and 1.8 percent, house prices have accelerated due to increased demand and a lack of supply. The average monthly Turkish salary is 7,830 Turkish lira (about $530), which is not enough to get a housing loan and barely enough to rent.
For most Turks, buying a house is out of the question, but renting is equally problematic. The average rent increase so far in 2022 is 19.6 percent. To put that into context, rents were up by just 1.3 percent in the EU at the end of the fourth quarter of 2021. With laws heavily favoring landlords, Turkish tenants have been backed into a corner.
Across the country, property owners and companies are taking advantage of loose regulation and raising rents as they see fit; many are doing just that amid the flood of new buyers from Russia and Ukraine. Moreover, landlords are on the hunt to rent out their properties to foreigners. A recent advertisement for a rental property in Istanbul’s Esenyurt, explicitly stated that “their property was not suitable for Turks to rent.” In 2021, an average two-bedroom apartment in the Atasehir district of Istanbul cost 3,500 lira a month (about $240). Today, it costs 9,000. Similarly, before the war, rent in Antalya, a coastal town frequented by Russians, was around 2,500 lira a month. Now it hovers around 10,000. And yet, as outrageous as these increases are, and as angry as Turkish citizens have become, Turkey’s property laws are failing to limit the astronomical hikes.
Landlords are squeezing out current tenants to make way for those who can pay more. By law, landlords are meant to keep annual rent increases in line with the consumer price index rate, which was more than 15 percent in 2021. However, after five years landlords have the power to increase rents beyond this cap, and to evict a tenant after 10 years without explanation. Tenants who cannot afford the rental increases face eviction. Not surprisingly, housing litigation is clogging Turkish courts, and about 20 percent of all new cases in Turkey are related to housing conflicts.
To be sure, war is not the only cause of Turkey’s housing crunch. With the pandemic nearing an end and Turkey an affordable destination, tourists are flocking to the country and owners 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 restricted Airbnb to protect housing stock, opportunistic owners in Turkey can do as they please. But with no regulations, taxes, or restrictions on these daily rentals, the lack of government oversight is hurting the average citizen.
Systematically, Turkey is pricing its own people out of the housing market. With some 52 percent of Turks in debt and four out of 10 having taken a loan from a family member in just the last three months, one of life’s basic needs, housing, is becoming an almost impossible burden. To reverse this trend and protect Turkish citizens, the government must step in.
Some increase in housing and rental prices may have been unpreventable, but the pain it is imposing can be alleviated. While those fleeing conflict in Ukraine need a haven, leaders must also consider who is being displaced in the process of providing one.
Alexandra de Cramer is a journalist based in Istanbul. She reported on the Arab Spring from Beirut as a Middle East correspondent for Milliyet newspaper. Her work ranges from current affairs to culture, and has been featured in Monocle, Courier Magazine, Maison Francaise and Istanbul Art News.