Concerns in Istanbul over rise in housing prices

By Humeyra Atilgan Buyukovali

ISTANBUL

Real estate experts in Istanbul are concerned following an approximately 28 percent rise in housing prices across the city in the last year. 

Housing prices in the city -- the country's financial and cultural capital -- have increased 27.57 percent as of June 2015 year-on-year, above the country average of 18.96 percent, according to data from Turkey's Central Bank. 

Reasons behind the rise include increasing demand, the low value of the Turkish lira against the dollar, and the city's widespread urban gentrification, real estate agencies and experts in the field believe.

"The main reason behind the rise is the increasing demand for buying houses," says Cigdem Boz, head of the Economics Department at Gaziantep University Islahiye Faculty of Economics and Administrative Sciences.  

Houses are bought for several reasons, mostly as an investment, to stop paying rent, to get married, or perhaps simply to study or work in a different city. 

This, however, seems to becoming more difficult for low and middle-income families, especially in Istanbul, experts say. 

Real estate property prices in Turkey have been increasing regularly after the 2008-2009 recession, "regardless of the value of the Turkish lira against the dollar," says Gokhan Karahan, director of marketing at the real estate company RE/MAX Turkey.

"The real estate sector is always a dynamic sector and the movements in the market are based on the demands," he says. 

Head of Istanbul Real Estate Agency Kadri Akbiyik, also a mortgage broker, believes the main reason behind the increase is the low value of the Turkish lira against the dollar.

"Most of the home builders establish contracts in U.S. dollars, and they buy the construction materials in dollars. The increase in prices is a natural outcome," Akbiyik says. 

The Turkish lira has lost about 20 percent of its value against the U.S. currency since the beginning of the year. 

"A house worth about $500,000 last year, for instance, is still $500,000. However, its sale in Turkish liras costs a lot more comparatively."

Akbiyik hopes to see the Turkish lira stabilize against the dollar "as soon as possible, because the house prices are already too high."

His real estate agency mostly sells houses in the popular and richer neighborhoods of Suadiye and Feneryolu in Kadikoy district on the city's Asian side. 

A 140-square meter new house with four rooms in those areas cost around 1.5 million Turkish liras (around $500,000) he says. 

"The most expensive homes in the city are in Beykoz, Kadikoy, and Besiktas districts," says Karahan from RE/MAX Turkey, adding those districts are home to Istanbul's most exceptional and popular neighborhoods.

Sultanbeyli, Silivri, and Esenyurt, on the other hand, are the districts, which offer the most affordable houses, he says. A new 100-square-meter home with three rooms can be bought for around 100,000 Turkish liras (around $33,644) today. 

Despite the increase in prices, however, there still seems to be a strong demand in property market, statistics show.

The number of house sales has been increasing over the years in Turkey, rising from over 427,000 in 2008 to over 708,000 in 2011, and to over 1 million in 2014, according to data from the Turkish Statistical Institute (TurkStat).  

Istanbul, with 19.3 percent of total sales in the country last year, leads the list. 

"There is a strong demand to buy houses, however, prices are so high that people prefer to buy cheaper houses in remote districts such as Beylikduzu or Cekmekoy," says head of Duman Real Estate Agency Alaattin Kucukduman.

His sales portfolio mainly includes units in Gayrettepe and Levent neighborhoods in the Besiktas district on the city's European side, where a newly-constructed home with three rooms is sold at around 700,000 Turkish liras ($ 235,509).  

But Kucukduman complains that there has recently been a lull in the market. "It is partly because of the city's widespread urban gentrification."

"Most landlords are now delaying their plans to sell and waiting for their homes to be rebuilt or renewed, which makes their homes gain value," he says. 

"There is a lull in the market despite statistics showing increase in house sales," says Nizameddin Asa, Head of Istanbul Chamber of Real Estate Agents. "Statistics do not reflect the real market. Yes, there is a strong increasing demand, but not for the luxurious homes built as 'branded housing projects', which cost at least 500,000 Turkish liras [around $167,000]."

A significant number of people in Istanbul are looking for a home with four rooms, which is not worth over 350,000 Turkish liras (around $117,000), Asa says. "However, the number of such homes does not meet the demand."

Slum areas across the city, as well as illegally built homes, non-earthquake-resistant neighborhoods and historical city cores have been cleared or rebuilt for high-income groups especially in the last 10 years. 

"New and better-quality houses, as well as urban gentrification and new transportation projects in the city are the factors that directly increase the average housing prices per square meter," says Karahan from REMAX Turkey. 

Boz from Gaziantep University agrees, stressing a different aspect. 

"Large-scale urban gentrification projects leave the landlords without a home for a temporary period of time. [Because their homes are rebuilt or renewed for better quality standards]. They, later, create demand in rental market, which increases rents. And, those who do not want to pay high rents, choose to buy a home. Demand increases again."

"Another reason is migration," Boz adds, stressing that as the number of migrants increases in Turkey, so does demand for purchasing homes. 

There has been a regular increase in home sales numbers to foreigners in Istanbul, statistics show. 

The number has reached 3,329 in the first six months of 2015 -- 2.7 percent of total sales in Turkey. 

It was 2,517 from January to June of 2014, or 2.3 percent of total sales, rising from 1,008 sales in 2013, 0.8 percent of total sales that year, according to the General Directorate of Land Registry and Cadastre.

Demands come mostly from Gulf countries, Russia and Britain, says RE/MAX Turkey Marketing Director Karahan.  

Istanbul, however, lacks enough place for new houses to be built, Boz warns, which she says will increase the demands to the existing lands. 

"The increasing demand will automatically continue to push up the housing prices."