Real estate in Türkiye has been steadily developing, with prices on the rise since the country began its development journey, especially after the year 2003. However, starting from 2020, prices experienced a significant acceleration due to various factors. We will now proceed to enumerate and analyze the key factors contributing to this surge in property prices;
Global Inflation: Following the COVID-19 pandemic, global inflation experienced fluctuations driven by various factors such as supply chain disruptions, changes in consumer behavior, and government stimulus measures. Against this backdrop, Türkiye’s real estate and infrastructure sectors were notably affected, particularly due to the ongoing development and construction projects across the country, leading to increased costs associated with construction materials for new projects.
Turkish Government’s Interest Rate Policy and Real Estate Market Surge: Leading up to the 2023 presidential elections, the Turkish government implemented a distinctive monetary policy characterized by a consistent reduction in interest rates. With the central bank’s interest rate plummeting to as low as 8.5%, this strategy inadvertently led to an escalation of overall inflation. Consequently, individuals turned to real estate investments as a means to safeguard their wealth amidst these economic dynamics. Preferring the potential short-term profitability of real estate over traditional safe-haven assets like dollars or gold, many investors fueled a surge in the real estate market, leading to a widespread increase in property prices nationwide.
Increased Demand and the Earthquake: Türkiye has witnessed a notable increase in both domestic and international demand for real estate, spurred by factors such as population growth, urbanization, and heightened interest from foreign investors. The rapid development of Türkiye as a nation and its economy has further fueled this trend. Additionally, the significant earthquake that struck multiple cities on February 6, 2023, resulted in heightened demand for construction materials and residential properties, consequently driving prices upward.
Economic Growth: Türkiye has experienced consistent economic expansion, prompting the government to substantially raise the minimum wage. As a result, overall incomes have increased, leading to greater purchasing power among its citizens. This surge in disposable income has heightened demand for both residential and commercial properties, consequently driving up prices in the real estate market.
Infrastructure Development: Government initiatives to improve infrastructure, such as transportation networks, utilities, and public amenities, have enhanced the appeal of certain areas for real estate investment. Improved infrastructure often leads to increased property values.
Foreign Investment: Türkiye has attracted significant foreign investment in its real estate sector, particularly from countries in the Middle East, Europe, and Asia. Foreign investors see Türkiye as a promising market with favorable returns on investment, contributing to price appreciation.
Tourism: Türkiye’s booming tourism industry has also played a role in driving up real estate prices, especially in popular tourist destinations along the coast. Tourists, both domestic and international, often invest in vacation homes or rental properties, increasing demand and prices in these areas.
Government Policies: Government policies, including incentives for developers and investors, urban renewal initiatives, and alterations in regulations pertaining to foreign property ownership, notably the law allowing Turkish citizenship through a $400,000 investment, have a significant impact on real estate prices. For instance, more lenient regulations regarding foreign ownership can result in heightened demand and subsequent price increases in specific areas favored by international buyers.
Overall, in recent years, a combination of factors including economic growth, infrastructure development, foreign investment, tourism, and government policies has led to a substantial increase in real estate prices in Türkiye. However, in 2024, adjustments including the government’s decision to raise interest rates to combat inflation and new regulations requiring a $200,000 investment for foreigners to obtain residence permits have tempered both local and international demand. Despite these changes, the ongoing worldwide inflation, particularly in construction materials, has prevented new property prices from decreasing substantially. Consequently, second-hand property sellers remain cautious about reducing prices. Moreover, in 2024 Türkiye continues to offer relative affordability in the global real estate market, contributing to the steady increase in prices.