The calm before the storm. What’s going on in Turkey’s real estate market before the election?
The Turkish real estate market is frozen: both sellers and buyers are waiting for the result of the presidential election, which will be held very soon — on May 14. It’s difficult to predict something now, and the situation of uncertainty is heating up. There are more and more questions: what will happen to the apartment prices in Turkey? Will foreigners really be forbidden to buy property in the country? What about those who have already lived in Turkey for many years, but did not receive citizenship? Answers to all these and other questions in the article.
The real estate market in Turkey seems to be quiet before the storm — just in a couple of days there will be presidential elections, and it will directly affect the housing prices in the country and the number of foreign investors who want to invest their money in Turkish real estate. And the storm will not pass in any case.
The fact is that the opposition candidate Kemal Kılıçdaroğlu proposes to ban foreigners from buying real estate in Turkey. The country’s parliament has already rejected such a proposal, but it is still too early to rejoice — if the opposition wins the elections such a ban may well become a new reality.
Fresh market analysts say that home sales in Turkey continued to rise at the beginning of the year. For example, the number of transactions in March increased by 32% compared to February, when the country was hit by an earthquake. At the same time, the annual increase in real estate prices as of March 2023 was 154% in lira, and the average price per square meter was 17,573 Turkish lira ($905).
However, very soon these prices will not be relevant, and we will see a completely new real estate market in Turkey, said the expert of the Turkish real estate market, founder and co-owner of the largest group of Russian-speaking people in Turkey, «Russians in Antalya RA» Alexei Valentinovich.
— The Turkish real estate market today is on hold because of the elections, which will take place in a couple of days. Investors took a wait-and-see attitude in order to understand what will happen to the market, which can go either way. Condo sellers are putting some really high prices on apartments so they can stay in the market on the one hand and not lose out in case of any unforeseen situations on the other hand.
Risks are really high now, and the real estate market immediately responded to stagnation in anticipation of the election.
Buyers aren’t in a hurry to make deals either. If the market turns in the up direction, pent-up demand will be triggered and prices will go up, but if it turns in the down direction, such investments will not make any sense soon. Everything depends on the results of the elections, and it is absolutely impossible to forecast anything. For example, the opposition stated different scenarios of developments, including a ban on the purchase of real estate in Turkey for foreigners for 5 years. Whether this will happen is the question.
— But why shouldn’t those who buy real estate only for investment purposes buy an apartment or house in Turkey right now, while nothing is prohibited?
— Because it is not enough to have an apartment, you need to have it to give you a long-term residence permit, and this may not happen. There are already some closed districts of Turkey, where it is impossible to get a primary residence permit after the purchase or lease of real estate. If the ban will be in force throughout the country, for many investors buying property in this country will be meaningless. And we are already seeing a lot of families leave Turkey, because they have not renewed their residence permits, and people are very disappointed and upset. They, as a rule, have already set up their life here, paid for their children’s schooling and rent for six months to a year in advance, and now they have to pack their bags simply because they cannot live here legally.
If we are talking about investors who do not need a residence permit, in the scenario of a ban on foreigners buying real estate, it is obvious that real estate in Turkey will quickly become cheaper. Because purely of domestic demand, the real estate market will lose drastically in value. Accordingly, investors simply calculate the risks and no one wants to lose money, and therefore buy real estate in Turkey now.
It is fair to say that the pent-up demand is huge right now. If there wasn’t this ban, the real estate market would grow very fast.
— But why did they start talking about a ban on the purchase of real estate for foreigners? This is the foreign capital that literally pours into the country in a torrent?
— Since last year, the situation in the real estate market has become heated: local residents can no longer buy or rent housing in good cities or neighborhoods. Now there is a regulation that does not allow the owner to raise the rent cost by more than 25% per year, but the inflation rate reaches 100%, and, of course, property owners try to compensate for this difference. But at the same time, none of the local residents don’t want to worsen their living conditions and move to the countryside. They simply stop paying rent or pay it at the old prices. As a result, landlords go to court to evict tenants, but such courts can last a year or even longer. In fact, the tenant has many more rights than the landlord.
This increase in the price of buying and renting housing led to the fact that the current government was forced to close some areas for primary residence permits to show that they care about the local population more than they do about foreigners.
As time has passed, we see that in those very closed neighborhoods, selling prices have stopped rising, while long-term rentals have fallen, and quite significantly. Short-term rentals are forbidden here, and apartments are rented illegally, so we are not talking about official statistics here (and prices there, according to my data, have even increased). As for the official long-term rentals in the closed areas, it has decreased, and significantly — by about 35%. As a result, those who could stay here rent here, while there are almost no newcomers.
— In your opinion, how likely is the real estate purchase ban scenario?
— You have to understand that anything is possible in Turkey. Decisions are made very quickly here, and just as quickly they are reversed. Everything here is situational, and such a ban is a reference to the local population, for whom buying real estate has now become absolutely impossible. Because of the huge influx of buyers with money, the cost of apartments for the local population has become exorbitant, and for Turks to buy their own homes in a good area has become almost a dream.
The possibility of a ban on the purchase of real estate for foreigners has long been talked about. But if it were not for the elections, it would probably have remained only at the level of talk. Such a ban is purely an election story, and so it is not certain that even if the opposition comes to power, they will fulfill this promise in full. They can always find «circumstances» that will not allow them to do all this in the amounts that have been stipulated and make the ban, for example, for a year.
On the other hand, the elections in Turkey are truly democratic — the opposition has a voice, and it PRs. So, in my opinion, today both coalitions have roughly equal chances, and no one can predict what will happen in the end. This includes the real estate market.
All predictions will be available in about a week.