Mar 07

Turkish property market, Q2 2022

Residential Market :

The boom in residential properties accelerated in 2022. The number of residential transactions reached 575,000 in the first five months of 2022, with a 37% increase compared to the same period of the previous year. Besides the strong demand, the effect of the low cost of borrowing was one of the major factors that triggered the boom.

Due to the increasing demand, there has been a remarkable increase in house prices. According to the data of April 2022 announced by the CBRT; compared to the same month of the previous year, there was an increase of 127% in nominal terms and 57% in real terms.

The factors that triggered the boom in the residential market :

1- According to Turkish Statistical Institute data, in April 2022, the construction cost index increased by 106% compared to the same month of the previous year. The mentioned cost increases appear as a factor that drives prices up in the entire construction sector, particularly in newly-built houses.

2- As a result of the hyperinflation, the search for real returns has greatly increased the demand for all types of properties, especially in the residential market.

3- The relatively cheap mortgage loans, under the hyperinflation economy, had an increasing impact on the increase in demand.

4- Decreased supply-side production and high demand pushed sale prices and rents up.

5- The high demand for the Turkish Golden Visa program also continues aggressively.  In May 2022, the required amount of investment for citizenship was increased from $250 K  to $400 K, but this does not seem to change the trend in terms of demand.

6- In addition to the cost increase, the problems on the global supply chain of the raw materials also increased the prices in the domestic market even faster.

7- Especially in most metropolis, the sharp increase in the land prices has also triggered property prices.

8- The project finance and cash flow problems of some contractors also negatively affected the supply-demand balance in the market.

9- The Russia-Ukraine War has led to a high amount of temporary visitors from both countries, and this also caused abnormal increases in house prices and rents in coastal areas, especially in Antalya.

However, the government started taking various actions to control the house prices.

Banking Regulation and Supervision Agency (BDDK) announced new decisions regarding mortgage loans in June 2022. According to that decision, the loan value ratio in mortgage loans for 1st and 2nd hand houses has differed . There will be no mortgage loan for houses with a value of more than 10 million TL.

On the other hand, limitations were imposed on annual rent increases of dwellings. Although the CPI is around 80%, starting from 01/07/2022, for the following 12 months, rent increases to be made in existing rental contracts have been set to a maximum rate of 25%, with a regulation that aims to protect the tenants.

Retail Market :

In Q1 2022, the leasing transactions reached 123.424 m² in total, increasing more than 100% compared to the same period of the previous year.

As of Q1-2022, the mall supply in Turkey Reached 14 Million m² in 453 Shopping Centers. On the other hand, there is approximately 895,000 m² of leasable area under construction in 30 shopping malls throughout Turkey. While the organized retail density is recorded as 165 m2 of leasable area per 1,000 people throughout the country, Istanbul has a retail density of 325 m2, which is twice the national average. By the end of 2024, it is expected that the retail density in Turkey will reach 170 square meters. When it comes to the shopping mall retail turnover index in February 2022, there has been an increase of 139% compared to the same period of the previous year. Looking at the number of visitors index, there was an increase of 97% as of February 2022 compared to the same period of the previous year.

Tourism and Hospitality :

The average occupancy rate in 2021 is calculated as 52.10% for Turkey, and 54.40% for Istanbul. While the average room price in Turkey for the same period was  82 €, it became 91 € in Istanbul. Considering the indicators of 2019, it can be said that average room prices reached the level of 2019 and hotel occupancy rates continue to recover. In the first quarter of 2022, the occupancy rate is calculated as 58.8% for Turkey, and 65.8% for Istanbul. The average room price in this period is 75 Euros in Turkey and 95 Euros in Istanbul.