Housing Challenges Persist in Turkey as Economic Pressures Mount

Serhan Ulkucu and his wife recently faced negotiations with their landlord to renew the annual lease for their family home in Istanbul’s Bostanci neighborhood. The monthly rent for their two-bedroom flat, where they reside with their seven-year-old son, surged by 147 percent within a year, reaching 11,500 Turkish liras (about $600) – 25 percent higher than Turkey’s minimum wage.

The 41-year-old Serhan, previously employed by an e-commerce company, expressed concerns about managing expenses after losing his job. Despite the challenges, he secured legal severance pay, providing temporary relief. The soaring inflation and economic downturn in Turkey, exacerbated by geopolitical tensions, have intensified the housing crisis ahead of the upcoming elections on May 14.

According to Turkey’s central bank data, property prices in February recorded an annual increase of 141.5 percent in Turkish liras, with a corresponding 75 percent increase in US dollars. Despite this, property sales declined by 21.4 percent year-on-year in March. Rent costs across Turkey also rose by 157 percent year-on-year in March, as reported by the Center for Economic and Social Research (BETAM) at Istanbul’s Bahcesehir University.

While annual inflation was reported at 50.5 percent in March, the housing market outpaced this figure. The government implemented measures in June 2022 to cap rent hikes at 25 percent for those residing in the same flat for less than five years. However, this initiative doesn’t apply to long-term tenants, allowing landlords to charge market rates.

In response to the housing crisis, President Recep Tayyip Erdogan announced ambitious construction projects and pledged to build hundreds of thousands of new homes by 2028. He emphasized further housing projects and regulations in a recent campaign address.

Three Turkish citizens interviewed by Al Jazeera highlighted a significant decline in purchasing power since last year, with income increases failing to match rising expenses, particularly housing costs. The currency depreciation crisis, which began in 2018 and intensified in the 2020s, contributed to the current housing challenges.

Erdogan’s unconventional approach to dealing with high inflation, involving interest rate cuts instead of increases, has led people to invest in real estate. The Turkish Central Bank’s key rate dropped from 19 percent to 8.5 percent since late 2021, despite rising inflation. Experts believe this has fueled housing demand, further driving up prices.

Foreign buyers, attracted by the depreciating lira and citizenship incentives, have also contributed to the rising rates. The war between Ukraine and Russia and partial mobilization in Russia have prompted citizens from these nations to consider purchasing properties in Turkey.

Erdogan’s political rival, Kemal Kilicdaroglu, blames “Erdogan’s capitalism” for the housing crisis and has promised to ban property sales to foreigners until the crisis is resolved for Turkish citizens. Kilicdaroglu also pledged to increase social housing inventory and keep social housing rent costs at 20 percent of the minimum wage.

The recent earthquakes in southeastern Turkey, coupled with migration and increased demand in other cities, have further impacted the housing market. While fears of future earthquakes may lead to a fall in demand, government policies to increase housing supply could potentially stabilize prices.

The housing challenges in Turkey persist amidst economic pressures and geopolitical uncertainties, with the upcoming elections sparking debates over potential solutions to address the crisis.

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