Turkish property market returns

The Turkish economy finds itself at crossroads, with the Turkish central bank implementing another substantial 5% interest rate increase on October 26, 2023. This move marks a cumulative rate hike of 26.5% since the elections held in June. Turkish inflation rates have continued their upward trajectory, with a staggering monthly inflation rate of 4.75% in September 2023, as reported by the Turkish Statistical Institute. This surge translates into an alarming annual inflation rate of 61.53%. The rate increases seem aligned with the Government’s medium -term programme unveiled in June, which aims to cut inflation down to more moderate levels. The rate increases are bound to have an impact on GDP growth, prompting the government to revise their growth estimates down to 4.4% this year, and 4% next year. Meanwhile, the unemployment rate, as per the Household Labour Force Survey, has been on a declining trend, falling to 9.2% in September 2023. This reduction marks a notable improvement since 2020 when unemployment peaked at 13%.

Turkish Property Market in 2023

In August 2023, the Residential Property Price Index (RPPI) published by the Central Bank of Turkey (TCMB) painted a vivid picture of the property market. The RPPI exhibited a robust month-on-month increase of 5.5%, translating to an annual increase of 90.3% in nominal terms and a more modest 21.9% in real terms, adjusting for inflation.

A glance at the graph below reveals a remarkable phenomenon: property prices in Turkey have surged tenfold on average since 2019.

In cities such as Antalya, this surge has been even more pronounced, with property prices nearly reaching bubble territory with a jaw-dropping 16-fold increase during the same period. Istanbul, a thriving metropolis, hasn’t lagged far behind, witnessing a ninefold increase in property prices since 2019. To understand this surge, we must consider the backdrop of a highly inflationary environment and a depreciating local currency. The Turkish Lira has faced an alarming depreciation of approximately 81% against the US Dollar since the beginning of 2019. Consequently, in dollar terms, property prices have nearly doubled, offering an impressive absolute return of 96% since 2019, equivalent to an annual return of 14.4% in dollar terms. These returns appear more realistic and sustainable, especially when viewed in the context of Turkey’s inflationary landscape.

A significant driver of the booming Turkish property market has been the influx of foreign investment, which gained momentum after the Russian invasion of Ukraine in early 2022. Antalya, a picturesque city nestled on the Mediterranean coast in the south of Turkey, has emerged as a safe haven for Russians and Ukrainians seeking refuge from the geopolitical turmoil. Many of these immigrants have opted to invest in real estate, either by purchasing properties or renting them, thereby injecting vigor into this micro market. This strong growth pattern in Antalya stands in stark contrast to the relatively subdued growth in Ankara and Istanbul.

Turkish Property Market Returns compared to other Major Markets

When comparing the Turkish property market to other major markets, a compelling narrative emerges. Real estate markets in many prominent countries have been on a bull run since 2019, driven by various factors, including the impact of the COVID-19 pandemic. The pandemic initially led to a slowdown in home sales, but this soon transformed into a seller’s market. Consumer preferences shifted towards larger properties that could accommodate various activities and household members, driven by the rise of remote work. Many city-dwellers found themselves seeking more space in less urban, lower-cost areas, and middle-class and affluent individuals expressed a strong interest in investing in properties conducive to remote work.

Real Estate – Average Annual Returns in US$ Terms (2019-2023)

The graph illustrates the annual returns in US dollars based on average and median house prices since 2019 across various countries. It is evident that almost all these countries have delivered positive real estate returns exceeding 3% per annum.

Turkey has emerged as a standout performer in this global real estate landscape, boasting an impressive annual property return of 14.4% since 2019. Turkey has even outperformed the United States, where median home prices are approaching record levels, and mortgage rates have climbed to 8%, the highest since 2000. The United Arab Emirates (UAE) has witnessed a robust bull run in its property market since the second half of 2021. However, due to the average property prices in the UAE mostly declining between 2019 and 2021, the average annual return during this 5-year period stands at a comparatively modest 5.6%.

To conclude, the Turkish property market has undergone a remarkable transformation over the past few years, with property prices skyrocketing in the face of inflation and a depreciating local currency. This surge is further fuelled by the influx of foreign investment, particularly from Russians and Ukrainians seeking refuge. When compared to other major markets, Turkey stands out as a top performer, offering substantial annual property returns. It remains to be seen how this trend will evolve and whether it will continue to outpace other global real estate markets in the years to come.

Note: The information has been gathered from publicly accessible sources, including government statistics and reports from various agencies. We have made diligent efforts to adjust the data to ensure a fair and equitable comparison. If you come across any discrepancies or encounter any concerns, please don’t hesitate to report them to us at info@mygoldenpass.com

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