The excessive and unapproved construction community’s increase in rent for housing has recently caused controversy and remains the main news on the agenda. In megacities, the situation is controversial; in Istanbul and remote areas, rates have increased from 30% to 70% over the year.
Is there a limit to this?
Content:
- There are 3 main reasons for the increase in rental rates
- Rental rate law requirements
- Why is this important for foreign homeowners in Turkey?
- Who to bet on?
There are 3 main reasons for the increase in rental rates
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Firstly, the market came to life after universities switched from online education to offline. Considering that the number of students in 2020 was about 7,940,000, almost everyone was looking for apartments to rent except those who live in public and private dormitories and those who entered the university in the resident city.
The situation with students is also difficult in the country due to the ongoing pandemic. The demand for student housing has become increasingly high especially in Istanbul and other megacities with many universities. Celiker Gokcin, who has been managing dormitories in Bucha (in Izmir, the problem of the rental housing shortage is also debatable because rents have tripled compared to the pre-coronavirus period), in a recent conversation with representatives of the Turkish media shared information about dormitory availability. For example, the famous Dokuz Eylül University launched full-time education on October 4, 2021. However, the hostel fee, which before the epidemic was from 12,000 to 20,000 TL, now amounts to 18-30,000 TL. Mr. Gokchin says: "Prices have not only increased in the country. Previously, students were willing to settle in dormitories. Now, they are looking for apartments. Because they don't want to live in crowded dormitories, they are afraid of a pandemic. In addition, there are doubts about whether there will be another lockdown in the country.
Anyway, having found neither an apartment nor a place in an inexpensive state hostel, they turn to private ones. But the coronavirus pandemic has also changed the work of such institutions by safety rules and health regulations. For example, we have reduced the number of male students from 163 to 131 and female students from 63 to 39. In addition, we do not accept unvaccinated students for settlement. As a result, we had to turn away many students. In this situation, we have to change meals so that students have breakfast and dinner in the dining room in small groups. The buffet has also been temporarily eliminated.
So even if we do not pay attention to the potential shortage of places, things are not as good everywhere as in Alanya where another large student dormitory is being completed. Turkish youth who are used to comfort, do not like it. It's much nicer and easier to live in an apartment if you rent it with your friend. You can have breakfast, lunch, and dinner, and sleep whenever you want but not when "you are supposed to."
- The second reason is the economic growth of 21.7% in the second quarter of 2021 which increased the need for skilled labor. Further, employees moving to other regions for project work are also looking for apartments and houses for rent which significantly increases demand. Landlords have become sly and prefer to settle civil servants.
- The third reason is the mobility of immigrants and foreigners who want to live here for a long time. They prefer to escape from the tough European lockdowns to Turkey where even in the spring during the restriction periods, the measures were less strict. Nevertheless, not everyone buys apartments and houses in Turkey. These visitors also rent housing in the country.
In any case, tenants are not interested in the reasons for the increase in rental prices. Most of all, tenants are concerned about the ratio of rent and their monthly income. No more than 30% of one’s income should be paid for rented housing but with a rapid increase in apartment rental prices, this figure is implausible.
Rental rate law requirements
From the point of view of legislation, there is no limit on rent: every homeowner can rent out his house to someone who can pay the amount of money declared by the owner. Another question is that when the price is much higher than the average, it is difficult to find a tenant - but not in 2021 when outdated housing is snapped up in emergencies.
Another question is that if tenants move in for a long time and live for years, the annual rent increase in the contract is strictly limited. The amount of the price increase is determined monthly. In recent years, it has been 13-15%. For example, the official maximum growth in July 2021 for extended contracts was 14.5%.
Thus, citizens who already have housing have nothing to worry about. The law provides that a rent increase once a year is permissible provided that it does not exceed the norm specified and announced by the authorities. This indicator is calculated by inflation and the consumer price index for the previous 12 months (year).
And even if the owner wants to arbitrarily increase the price higher than the statutory rate (for example, by 20-30%), the tenant has the right to calculate the updated monthly payment amount with an "official" coefficient and not pay a penny more. In this case, if the tenant does not violate other terms of the contract, no one will be able to evict them.
Here is a life hack: few people know that if the rental price is high, the tenant can pay less. He can do this by defending his rights in court (or only threatening to go to court) and despite the amounts in the contract that he has certified with his signature. For example, this is possible in cases where the average market value of renting an apartment is 2,000 TL per month. The agreement provides for consent to a "unilateral increase" and the owner suddenly requests 20,000 TL monthly.
But this is not a very well-known route to follow. An owner who exceeds the average market price by 10 times or challenges what is written in the contract in court is an unlikely situation.
Another question is that there is a situation where the landlord can increase the rent by going to court. It is due to the "5-year term rule". If tenants have been living in an apartment or house for many years and are not going to move out, the right to an annual rent increase by the average index value (13-15% in recent years) is limited to 5 years.
After 5 years, the homeowner can go to court and ask the judge to determine a new payment amount applied from the 6th year.
Why? Because anything can happen in 5 years; real estate in this area can rise in price by itself or for objective reasons. For example, a subway/school/state hospital/kindergarten/industrial enterprises were built nearby and employees who came for project work are willing to pay much more, etc.
The judge considers all these factors and the condition of the rented residential property and then sets the rate according to the owner's wishes based on his ideas about the reasonable rental price.
We talked about the exceptions that allow you to go to court in case of violation of these rules such as the limit of the annual increase in the tariff rate, the "5-year rule", an excessive several-fold change in the declared rate relative to the average rent for real estate in the same area and similar in area/characteristics.
However, there is nothing you can do with the average rental cost in popular cities in Turkey now. It has increased significantly almost everywhere.
Market players call this nothing more than "abuse", and homeowners should come to their senses and not create lawlessness due to these excessive demands. If this continues, residents (especially young people and students) will somehow solve their housing problems and return to their or relatives' homes. The homeowners will not get a client, and they will spoil their reputation for a long time.
Why is this important for foreign homeowners in Turkey?
Foreigners buy housing will stable funds after spending a summer or two on the seashore; many begin to wonder whether they should buy a spacious apartment in the best area or change an apartment for a house.
However, it is difficult to maintain some properties and it is not cheap when paying utility bills, AIDAT, etc.
Therefore, they keep one for themselves and rent out the other (or others) and begin to earn money.
Taking into account how fast rental rates are growing now, the payback period for investments in residential real estate is gradually decreasing and in the future, it may become shorter.
The logical and reasonable step would be to take advantage of the current situation while Turkish homeowners are exorbitantly raising prices to set a more appropriate price for an apartment and get tenants.
Currently, it is important for homeowners that many people in Turkey are looking for housing for a long stay.
Who to bet on?
Landlords can count on students, young families, engineers moving for project work, architects and other qualified employees, as well as business travelers. The employers can pay for housing for some of them and some parents are willing to help their children financially.
As a result, for a slightly lower price in the market and without recommendations or additional payments, you can get tenants who will live and pay steadily for many years. It is much more profitable than renting an apartment weekly or monthly.
Moreover, there is no risk that the amounts received for rent will significantly depreciate. The annual price growth index also takes into account inflation. After 5 years, you can recalculate the rent.
Some investors have done this and those who were successful were those who bought high-quality housing in Bodrum. For the amount received from the seasonal rental (5-6 months) of a house or spacious apartment in the summer of 2020 or 2021, it was possible to buy an apartment in a less sought-after area.