Real estate analysts sum up the detailed results of 2021 every day, taking into account the latest information for December. There's reason to believe that the current year will be a record year for the sector for several things.
The construction industry began the previous year with stagnation and an ongoing pandemic. But, month after month, the growth gained momentum. The situation changed dramatically in the second half of the year. Buyers had genuine suspicions about the rapid increase in home prices because the previously rising construction costs started falling. It prompted consumers to buy properties as soon as possible.
Eventually, at the least, the results fulfilled expectations, and even more, they exceeded even the most optimistic expectations.
Content:
- Records of the year
- Sales to foreigners
- New leading regions
- Sales growth
- Growing interest in mortgages
- Infrastructure
- Currency and gold – or housing?
- What does the industry expect in 2022?
- Experts' opinions
- 2022 - the year of optimism
Records of the year
Back in November, a record was established for 11 months – 1.265.000 transactions with residential real estate for January-November and the average annual record for 2021 was 178,814 transactions a month.
It's known that there were 3,020,225 real estate transactions in 2021 throughout the country. For the first time in the entire period of statistical monitoring, the bar of 3,000,000 was exceeded.
Let's clarify that the previous record holder was 2020. Despite the pandemic, 2,678,074 transactions were done that year.
Really, the country owes the current record, first, to the enormous number of transactions for land plots - not just apartments or houses. Regardless of that, the December rates are impressive with almost 1.745.000 real estate transactions of various kinds.
Also, housing was sold very actively and the price growth reached a minimum of 40% on average in the country. The most common increase was 50% and above; rental rates peaked at 100%. As we've already announced, the intended goal of 50,000 property transactions with foreigners per year was overcome back in November.
Sales to foreigners
As for real estate sales with foreign investors, there were 3 records from the previous year and it's hoped to overcome them this year.
Foreigners rushed to buy properties, taking advantage of the opportunity of the dollar and euro currencies growth. The 2 mentioned records are 50,735 property transactions for January-November 2021 and 7363 transactions in this month alone. It's +48.4% higher than in November 2020 and the highest monthly sales figure ever observed (more than 7,000 deals). A year earlier, a maximum of 45,483 apartments and houses were sold in 2019.
As for the nationality of new homeowners in Turkey, leaders are citizens of Iran, Iraq, and Russia. Istanbul and Antalya are 2 metropolitan areas where the most residential real estate is bought by non-residents.
Also in 2021, the average apartment price purchased by foreign investors was closer to $ 200,000 (or over $ 196,000). Turkish Real Estate International Promotion Association GIGDER has set the goal of achieving higher rates of $ 225,000 per housing unit sold to non-local buyers starting in 2022. This is a goal for the upcoming years but it can be achieved in the current year.
Fresh innovation should contribute to the increase in sales. This is a law that protects people who want to get Turkish citizenship by investment or “accelerated citizenship” (based on real estate investments of $ 250,000 or more) in some way. On the one side, strong fluctuations in exchange rates were useful for buyers in recent months. Sometimes they allowed them to receive a certain amount or select housing with an area much larger than what they would have been able to buy in the past for the same amount.
On the other hand, dollar changes were a problem. Since the price in contracts was fixed in Turkish lira, several thousand or even hundreds of dollars in decreased real estate prices due to the changing exchange rate could take away the possible “accelerated citizenship”. This is especially upsetting when housing was purchased specifically for this.
New leading regions
Istanbul and Antalya remain popular but Izmir and the surrounding areas are in demand now. Even though the price increase reached 38.7% in Istanbul, in Ankara, the capital of the republic, it was 36.1% and in Izmir, it was 40.2%.
The rates in the provinces of Aydın, Muğla and Denizli are even higher at more than 52%. The provinces of Diyarbakır and Şanlıurfaare also gaining popularity. Here, the price growth is about 50% in a year.
Antalya, as a summer region, added about 40% to the cost over the year although this figure is much higher in some of the most popular areas.
The average cost per square meter of residential property was 5,317 Turkish liras (TL) in September. It's expected to reach 6,000 TL in 2022 and even exceed it.
This cost was higher at the end of 2021 in the most sought-after areas. For example, it was 8,166 TL in Istanbul and in Izmir it was 6,337 TL.
Sales growth
Why are sales growing and will they continue to grow?
Concerns about price growth after rising construction costs have encouraged investors who are ready to buy move from planning to action. The reduction of bank rates to about 1.2% a month also played a significant role in this. In 2022, Turkish real estate market players hope that authorities will take measures and reduce housing loan rates even more. The rate should reach 1% or drop even slightly lower. This is guaranteed to encourage sales.
Nazmi Durbakayım, the Chairman of the Board of the Istanbul Association of Builders (INDER), explained that the best solution to meet the huge demand for residential units is to expand offers so that prices are affordable. So, on the one hand, the authorities need to ensure a cost-effective supply of land plots and stable prices for building materials. On the other hand, to support buyers about interest rates, it's advisable to repeat the experiment of last year with a reduction of mortgage interest rates to 0.64-0.69% a month by state banks. “In other words, it's necessary to take and implement legal steps for real mortgage loans,” he stressed.
Growing interest in mortgages
The increased interest of citizens in loans, especially during the interest rate reduction by the authorities and the Central Bank – currently, it is just over 1.2% – led to the growth of mortgage transactions in the last quarter of 2021. This pattern was found in statistics. It's expected to continue and likely to intensify in 2022. Home sales in Turkey hit 1.265.000 transactions in January-November 2021. The number of transactions grew in November after the actions by the authorities and Central Bank. Housing sales using mortgages decreased by 55.4% in January-November because of the inconvenient percentage. During the same November 2021, mortgage sales rates increased by 61% compared to November 2020, making up 39,366 transactions at once.
Infrastructure
In 2022, major transport projects will be finished in Turkey. Among them are the opening of high-speed railway lines, metro lines, and the Çanakkale 1915 bridge. The construction of the Istanbul Canal, an alternative to the Bosphorus, is in progress. Earlier, we talked about projects where in some areas, is making real estate more expensive, like in Istanbul, which is increasing much faster than the national average. Potential buyers should take this into account if they plan to purchase real estate to quickly resell it.
Currency and gold – or housing?
Turk.Estate has often mentioned that demand from foreign investors has grown dramatically due to the increase in currency exchange rates. Right now, this should stay at the current rate and with the help of the recent law to fix the contract prices in real estate transactions. This is for foreign currency and not Turkish lira.
Also, there's a new trend of local residents or homeowners of property stocks (stocks, bonds, currencies, savings in a bank account, etc.) are less likely to risk it by playing on booms and busts with the frequent currency fluctuations.
People prefer to fix their savings in real estate, mostly in residential properties. But in 2022 like the year before, land plots for the construction of individual houses will be in great demand. This is because buildings made according to your own plans are sometimes cheaper than apartments in a modern complex in a prestigious area.
Residential real estate has become the safest haven for investment in Turkey.
What does the industry expect in 2022?
New records are obvious. Property prices will go up with an increase in demand. Prices have risen, especially because of a limited supply (which decreased because vacant apartments and houses are almost sold out).
Also, real estate developers will adjust housing costs, taking into account the growing construction costs of new buildings. Available stock of key materials at construction sites are running out, their prices are growing and developers have to purchase cement, iron, etc. at steadily rising rates.
Also, due to the pandemic, previously “frozen” projects, suspended in 2020 and 2021 will also be back on the market. Construction work is in progress and sales will start very soon.
As for trends, in 2021, houses have become popular and mostly branded ones with balconies, terraces, and a large surrounding area. This trend will continue in 2022 and probably in 2023.
New projects will be made in the most spacious and private way, “a whole house in one apartment”. It's perfect even for high-rise apartment buildings where small apartments were in the majority before.
The further away, the more the 1 + 0 studio format will become a thing of the past.
Experts' opinions
Nazmi Durbakayım, the Chairman of INDER said: “The thing we have been doing in 2021 is being able to keep housing prices affordable. It has reached its limit. It's inevitable that some of the growing costs will be reflected in property prices.
Real estate developers have made every effort not to boost inflation and keep prices affordable. These efforts have produced positive results in current projects but new residential complexes and projects may not have this chance.
Prices will grow but the shortage of vacant apartments on the market is so obvious that housing costs won't reduce sales: “Our goal is to break last year’s record in 2022, exceeding the milestone of 1.450.000 transactions reached in 2021,” said Nazmi Durbakayim.
Eyüp Akbal, the Chairman of Fuzul Group, pointed out that despite the ongoing pandemic, the global economic downturn, along with inflation, extensive investments in properties will continue: “2021 was a very active year. In conditions of high inflation, people have understood clearly that the best investment is real estate with prices that don't decrease. So, I think that the number of homeowners will only increase in the upcoming years. Regarding 2022, I believe that the exchange rate will stabilize and that this will help the economy and the construction industry, in particular. New start-ups will appear this year and the influence of digital technologies will intensify in the construction sector.”
Altan Elmas, Chairman of the Board of the Association of Developers and Investors of Housing Construction of Turkey (KONUTDER), said that houses are an important investment tool to save money in 2022. And since 2021, housing has become the best investment tool that protects savings. Earlier, some investors preferred gold and currency. Pointing out that November's sales of 179,814 units were the fourth highest monthly total ever recorded, Elmas stated: “Fearing the devaluation of the Turkish lira, investors are searching for an opportunity to protect the value of their assets. We see a certain amount of assets being redirected to the housing segment and we'll see a massive return of finance from currencies and gold in the coming months, if not days.
Home sales will be strong, thanks to the public's understanding that prices will still rise even more and the fact that real estate investment is an important insurance against inflation."
Tamer Özyurt, the Chairman of Board in Özyurtlar Holding, says: “We see that the reduction in the interest rate on loans has a positive impact on sales in the domestic market. In order to provide stable activity, it's necessary to control the cost of raw materials and reduce the interest rate on housing loans. Also, new funding models should be shown to investors. If these steps were taken to make residential investment attractive, we, as contractors, would also be able to look more confidently towards the future and bring more and more new projects to the market.”
2022 - the year of optimism
The real estate sector, after a difficult year, is preparing to spend the current year extremely active as industry representatives are full of hope and count on the support of authorities and banks. Balance Board Chairman Baki Budakoglou has summarized the state of the market, explaining that 2022 will be a year when the sector achieves stable performance and sufficient balance. Even if it doesn't show record growth in performance. A real recovery in the sector, according to analysts, should be expected in the second half of 2022.