Turkey: collapsing currency, booming house prices

Turkey’s residential property market is now one of Europe’s best performers, despite modest economic growth. During the year to end-Q2 2015, Turkey’s nationwide house price index surged 18.96% (10.95% inflation-adjusted), according to the Central Bank of the Republic of Turkey (CBRT). During the latest quarter (Q2 2015), house prices rose 5.08% (3.35% inflation-adjusted).

  • In Istanbul, Turkey’s largest city, house prices skyrocketed 27.6% (19% inflation-adjusted) during the year to end-Q2 2015
  • In Ankara, the capital, house prices rose by 12.2% (4.6% inflation-adjusted)
  • In Izmir, the country’s third largest city, house prices rose by 15.9% (8.1% inflation-adjusted)

Prices of new homes are also rising at double-digit rates, though opinions differ about how much.

According to CBRT, prices for newly-built houses soared 17.4% (9.5% inflation-adjusted) during the year to Q2 2015. Istanbul recorded the biggest annual increase of 25.6% (17.1% inflation-adjusted), followed by Izmir, 16.6% (8.7% inflation-adjusted); and Ankara, 14.2% (6.5% inflation-adjusted).

On the other hand, the Gyoder New Home Price Index from REIDIN showed new house prices rising by only 6.87% during the year to July 2015.

Property prices in Turkey are expected to continue rising during the remainder of 2015, according to some local property experts.

From 2007 to 2011, house prices in Turkey fell by 2% (-29% inflation-adjusted), due to economic growth slowing sharply to 0.7% in 2008, after GDP growth during 2002-2007 of 6.8% annually. Existing house prices plunged 22.45% in 2008 (-14.65% inflation-adjusted). When adjusted for inflation, house prices dropped 2.82% in 2009, by 3.54% in 2010 and by 2.39% in 2011.

Since then, home prices have risen continuously.

However, this is taking place against the background of a collapsing currency, dissatisfaction with the government, chaos on Turkey’s doorstep in Syria and Kurdish Iraq, and rising internal tensions. On the other hand, Turkey’s economy grew by 3.8% during the year to Q2 2015, up from 2.5% the previous quarter – its strongest growth for six quarters, according to the Turkish Statistical Institute (TurkStat).

Foreign individuals can freely buy up to 10% of property and land in officially zoned areas which includes cities, towns and resorts. Foreigners cannot buy properties inside and near military, strategic and security zones and foreigners must secure a clearance from the Aegean Army Command. According to the ATSO, it takes three to six months to receive an answer from the military regarding the clearance.
Analysis of Turkey Residential Property Market »

Last Updated: Mar 20, 2016

Istanbul is less expensive this year for almost all foreign buyers, due to the dramatic recent decline in the Turkish New Lira. However the bad news is that over the past three years, gross rental yields for apartments have fallen significantly, due no doubt to the pressure on the Turkish economy.

Apartments in the marvellously attractive Besiktas district are (of course) somewhat more expensive than elsewhere in Istanbul, with prices of just above €3,600 per square metre for 120 square metre (sq. m.) apartments. Lucky are those that live in this area of palaces and large houses, looking out onto the Bosporus!

A 120 square metre apartment in Besiktas now yields a return of around 3.1%, versus 6.6% two years ago. Yields fall off significantly at the higher sizes, which are much more expensive to buy per square metre.

Bakirkoy is a mixed district, and has a large range of houses and apartments and areas. Prices for small apartments here are as high as in Besiktas. Gross rental yields are around 3.0% on 120 square metre apartments – again significantly lower than three years ago.

True, better returns can be had in the noisier Beyoglu which is a more ‘work-oriented’ district. But here too yields have fallen far since we last surveyed it, especially for larger apartments. Yields are down to 4.1% to 5.2%, from 5% to 8.7% three years ago.

Kadikoy on the Anatolian side of the Bosporus is another very mixed district, buzzing with life and students, largely residential. As is to be expected, prices of residential apartments here have a wide range. This year we found yields in this district to be the same as last year, 120 square metre apartments here can return 4.3%.  Smaller apartments here have reasonable yields of 5.4%

The beautiful Sariyer district is expensive in its upper reaches, with residential property prices reaching €3,900 per square metre, again down significantly on recent highs.. But smaller apartments are good value. Yields are again down very significantly, to around 2.4% on a 120 square metre apartment.

The varied Sisli district has apartments mostly over €2,700 per square metre, and yields of around 4.0% on 120 square metre apartments.