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Housing in Turkey is Getting More Expensive. Cheap Loans, Deferred Demand, Shortage of Supply… What's Next?

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2020 can be fairly called a successful year for the Turkish real estate market. Deferred foreign demand, cheap loans and advanced domestic interest in local properties made record sales and ... pulled prices up. But how much a square meter of housing costs in Turkey today and whether it will grow in 2021?

The cost per square meter in Turkey is growing at a record pace. The report of the Central Bank of Turkey on the Residential Real Estate Price Index (RPPI) notes that in December 2020, prices jumped by 30.3% for the year (in lira). Adjusted for inflation, housing prices rose by 13.7% year-on-year.

New buildings rose in price by 31.6% in December. However, secondary housing is not far behind and gained 30.2%. Meanwhile, since the beginning of 2020, the value of the lira against the dollar has decreased by almost 25%. Therefore, in dollars, a square meter is still inexpensive. In December, the average mark stopped at 3,887.5 lira ($530).

In the context of regions, in the last month of last year, the largest annual growth of 30.2% was recorded in Ankara. This is followed by Izmir (+29.4% for the year) and Istanbul (+27.9%). The latter is the leader in the cost per square meter. In December 2020, real estate here sold for an average of 6,484 lira ($885) per square meter. It was twice as cheap to buy in the capital city – 2,895 liras ($395) per sq. m.

Sales of Turkish properties in December decreased by 47.6% compared to the same period last year. But the indicators of the last month are rather an exception. According to the results of the whole of 2020, real estate sales exceeded the figures of the previous year by 11.2% or 1.49 million transactions in 2020 against 1.34 million in 2019. Foreign demand in general was high, but (for obvious reasons) lower than in 2019, by 10.3%.

The most numerous foreign buyers of Turkish meters at the end of 2020 and in general at the end of the year were Iranians. In total, they purchased 7,189 properties, 784 of them in December. This is followed by citizens of Iraq (a total of 6,674, of which 724 in December), Russia (3,078 for the year, of which 349 in December) and Afghanistan (1,929 and 224, respectively). Istanbul, Antalya, Ankara, Mersin and Yalova became the most popular regions for foreign buyers of real estate.

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“The market faces a shortage of offers for the first time”

Sergiy Volchenkov, Managing Director at Tolerance Homes

The year 2020 was unique in all respects, including for the Turkish residential real estate market. In the year of the coronavirus crisis, demand increased pulling up prices.

The main reason is the program of cheap mortgage lending, which was launched by the government to support the economy in the pandemic. The rates were reduced to 7-8% per annum in lira. This indicator has not been seen for ten years. As a result, we have broken all records in terms of real estate sales, especially in the domestic market.

In regions such as Antalya, the Turks bought up most of the built real estate and the market, perhaps for the first time, faced a shortage of supply, which pulled prices up. By the way, the share of real estate sales in mortgages increased in Turkey in 2020 by 98%. However, the banks kept the interest rate low for a short time (until mid-October). The bid went up again.

Foreign demand at the end of 2020 was also high, but it still sank slightly (by 10.3%) compared to the indicators of 2019. Although we thought it would be much worse. A sharp jump in interest in local real estate occurred in the summer. As soon as the borders opened, buyers flew. Deferred demand worked.

During the year, we received requests from various countries, including Germany, the UK, and Russia. But traditionally, the most active are citizens of Iran and Arab countries. The Russians are in the top 3. Iranians buy more often in Izmir, Arabs – in Istanbul, Russian-speakers - in Alanya and Antalya, less often in Bodrum and Marmaris.

According to our data, 70-80% of foreign demand in 2020 was for properties worth €35-65 thousand. No more than 10% considered real estate in the range of €65-150 thousand. Up to 5% of foreigners were interested in more expensive objects and, as a rule, under citizenship.

Most often, they purchased a primary one. The secondary part of the total share of sales to foreigners is 10-15%. This percentage is significantly higher in the structure of transactions with local companies.

Speaking about the purpose of the purchase, a few years ago, foreigners bought apartments for vacation and rental (up to 90% of transactions). Today, a completely different approach. Most of the requests come from those who plan to move for permanent residence or pursue an investment goal (resale or lease).

As for our expectations for 2021… The pent-up demand hasn't gone away, requests are coming in, so sales are likely to grow, but not prices. There is no such powerful driver for this today as a cheap mortgage. But you should not expect a drop in the cost of a square meter. The remaining objects will be selected from the market.

Also read: Become a Property Owner in Turkey in 5 steps

“Apartment prices will continue to rise due to higher construction costs”

Aleksandra Kabakci, Executive Director at Ataberk Real Estate

In 2020, we saw an increase in demand for real estate in Turkey. Sales for the year increased by 11.2% and amounted to 1.49 million transactions. Therefore, it is quite natural: when the interest is high, prices go up.

During the pandemic, demand was stimulated by the reduced mortgage rates in June 2020. Plus, do not forget about such an indicator as the cost of construction. It grew last year, and already this year developers note an increase in the cost of building materials. Therefore, it is not worth hoping for a decrease in real estate prices in 2021.

Last year, prices increased in Ankara, Izmir and Istanbul, Turkey's largest cities with growing populations. Plus, these are the major trade, financial, and industrial centers of the country, which continue to develop actively. It was in these cities that both the local population and foreigners most often bought real estate in 2020. The latter also often purchased realty objects in the Antalya region.

Villas, apartments with terraces or large balconies, as well as apartments at some distance from the sea are now more desirable. The purpose of the purchase is permanent residence. By the way, developers have increased the volume of construction of villa complexes, buying one of which you can apply for Turkish citizenship.

In 2021, leading construction companies, realtors and analysts expect the same high growth in real estate prices as in the past year. And first of all, because of the rise in the cost of building materials, and also land plots: free for development becomes less every year. Therefore, if you plan to purchase real estate in Turkey, then now is the time for this. You can find ready-made complexes in which developers sell apartments on shares (developers need money for new construction), or projects far from the coastline, but with more budget-friendly apartments.

Ways of immigration to Turkey
Turkey
Residence Permit In Turkey - Real Estate
Residence permit For 2 months
from 50 000 $
Turkey
Turkey Citizenship by Investment - Real Estate
Citizenship For 3 months
from 400 000 $

 

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