Prices of residences in Turkey grew by 160% year-on-year in the second quarter of 2022, as already reported by Turk Estate. The third quarter is likely to perform even better. For instance, by the end of summer, prices had increased the highest in Istanbul (+185% year-on-year), Ankara (+165%), and Izmir (+151%).
Foreigners are still actively purchasing real estate in this country. In the first half of the year, the number of transactions in this segment was approx. 57% higher than in H1 2021. 39,729 units were sold to residents of other countries, accounting for 4.8% of all the housing transactions in Turkey.
Content:
- General situation in the market
- Rent: features of demand
- Sale: features of demand
- Ripple effect on the market
General situation in the market
Ersin Yazıcı, Mayor of Antalya, reported that approx. 10,788,467 foreign tourists arrived in this city by air by the end of September. Over 10 million people! For obvious reasons, a significant share were Russians (16,000 – 19,000 people per day) and Ukrainians.
Not everyone is able or willing to purchase a home on the first day of arrival in the Antalya Province, so there are almost no vacant rentals left. This is good news for landlords but discouraging for tenants.
Rent: features of demand
As for the features of demand, analysts explained that foreigners selecting rental homes don’t always care whether it’s a 2+1 or 3+1 residence, as long as the apartment is not tiny. The key priority is either a location near the sea or at least a sea view, according to İsmail Çağlar, Chairman of the Antalya Real Estate Agents. He also specified that 5 – 10% of prospective tenants first rent a hotel room for a month or two to look around, compare options, and carefully select the right one.
However, Turk Estate found out that a considerable portion of people moving to Turkey is trying to settle as soon as possible by finding a roof over their head for themselves and their families. They then select one of the first options they viewed that matches their price and other essential parameters. They are concerned that prices may surge in the week or that there will simply be no vacant apartments left.
Their concerns are justified: it is rentals, not sales that account for 80% of the current market activity, Mr. İsmail Çağlar specified. There are currently almost no vacant rental residences left, except unseemly options.
Locals, especially young people and students are also facing huge challenges due to the crowd of foreign tenants flowing into the country. Any family is now hard put to find a rental home. Turkey is a country where people who couldn’t afford to purchase an apartment or a house are renting - not just for decades, but for generations.
Municipalities and real estate agents are optimistic about the national project providing social housing for low-income families. This is primarily implemented by the Housing Development Administration of the Republic of Türkiye (TOKİ). For instance, 5,000 residences will be built in the nearest future. 800 of them will soon be available for prospective owners in Alanya and Gazipaşa (500 and 300 homes, respectively).
The rental market throughout the country, except in the low-demand localities, e.g., remote villages, has long been in tumult. The rental bubble has already burst in some places. Most owners who leased their apartments at high rates are unable to claim the agreed-upon rental payments. Foreigners who eagerly rented these residences are sometimes late with payments or simply vacate the premises without paying. As a result, the Antalya court has already recorded multiple cases of conflicts between homeowners and tenants.
The local population, scared away by the rentals that increased several times over the past few months alone, is no longer willing to deal with landlords who have demonstrated their willingness to inflate the rents this year.
Even though housing rental rates are gradually normalising, there are still almost no vacant rentals.
The rent on homes along the Antalya–Alanya axis has increased by 215% since March/April 2022 and by 300% in Istanbul. The demand for rentals in Bodrum is also sky-high.
Sale: features of demand
As for the trends in apartment purchases and sales, Turkish analysts confirm the trend identified by the NF Group (former Knight Frank Russia): wealthy foreign buyers prefer expensive high-end homes. In Istanbul, these are primarily ultra-luxury residences in Bakırköy, Florya, and Ataköy.
This is typical in Antalya too. Prices of 3+1 homes (furnished upscale apartments in good communities) often reach 48 million Turkish Lira (TL), but requests for properties worth TL 5 – 10 million (about USD 280,000 – 560,000 at the current exchange rate) are also numerous. This is particularly relevant as purchases worth over USD 400,000 make the buyer eligible for fast-track Turkish citizenship. If the transaction amount is under USD 400,000 but over USD 75,000, buyers can apply for citizenship in a few years if their property is located in districts where permanent residence is granted to TAPU holders.
Over eight months of 2022, the sales of housing to foreigners grew by 34% in Turkey - up to 45,069 units. This performance is expected to reach a historical high by the end of the year.
For many people, Turkey is a haven to wait out the dangerous times and purchase real estate for investment purposes, killing two birds with one stone.
Curiously, Ukrainian citizens do purchase homes in Turkey as they did before (even on a slightly greater scale than before) but most of them prefer to rent. Many are unwilling to assume long-term obligations and plan to move back home, unlike many Russian buyers who definitely view Turkey as their new home (especially since the fall of 2022) and want to settle there for good.
Recent data suggests that three provinces – Istanbul, Antalya, and the emerging Mersin – are the most popular amongst foreign buyers who invest in real estate to eventually gain citizenship.
After Istanbul, Antalya is number two for obvious reasons. It has a very long summer season, from March through November (in particularly warm years, people swim in the sea from February through December). You can sunbathe on nice days all year round. This city offers comfortable living at any time of the year, with numerous kindergartens, schools, and colleges, including English-language educational establishments.
Many wealthy visitors start their businesses here or invest in commercial properties, i.e., offices or companies, which is possible.
How does this affect the Turkish construction and housing market as a whole?
Ripple effect on the market
Construction companies, especially developers building brand homes, are intensifying their promotional efforts. This is especially true in large cities, where developers are targeting foreign clients.
Turkish analysts believe that over the next few months, foreigners will be even more interested in the large cities.
This is great news for the Turkish economy, ensuring a consistent influx of foreign currency to the real estate sector and continuous tourism revenue.
On the other hand, the Russian–Ukrainian conflict boosted utility prices. As a result, the cost of construction is increasing, not only in Turkey but also in many other countries, while some materials have become twice as expensive (or more) as before. This makes it more challenging for developers to fulfil the previously assumed obligations, so some projects are frozen, although the country needs hundreds of thousands of new residences (lots of new developments) a year.
However, the situation for the local population (both tenants and prospective homebuyers) will remain challenging in the mid-term. An average Turkish family, by default, has less money saved than the (numerous) rich tourists relocating from other countries.
The previously mentioned national project on providing low-income families with housing, implemented by the Housing Development Administration, promises some hope. The house prices will keep growing, while the rental rates will remain high for a while. There are signs that first, the rent and then the purchasing prices of residences will increase this winter – again.
The question is whether the demand from foreign visitors will cool down. Market experts think not. If the current geopolitical tensions keep rising, there’ll be no chance of a slowdown, on the contrary, the demand for purchasing homes in Turkey will surge. Local analysts believe that as much standard housing as possible needs to be designed and built urgently, to ensure that Turkish citizens are not “crushed” by these rents and purchasing prices.
A powerful incoming cash flow will benefit the Turkish market and the economy in general.