Economy in Turkey: Prominent economist says “Housing and rental prices will sky-rocket”

The change made last year in the regulation of the rent increase limit, which is determined based on the twelve-month average of the CPI, will continue. According to the decision, it is expected that the upper limit of the rental increase rate will be applied as 25 percent for residential rents for a period of one year until July 2, 2024. However, some landlords do not listen to this limit and continue to make rent increase rates at the level of inflation.

Economist Evren Devrim Zelyut, who said that the housing and rental demands of foreigners would push up the prices in the market adding that the mechanism of ‘accumulation of goods against inflation’ would be activated again, due to the exchange rate increase.

SALES VOLUME DECREASE BUT PRICES INCREASE

Zelyut went on to share following: “It is true, sales volumes have decreased, but prices are rising. Then it is also necessary to see that the elements that determine the price have changed as well.

WHY WILL PRICES CONTINUE TO INCREASE

Let me tell you what happened, what will happen. Prices will continue to increase because:

1-No one should expect the housing price to fall when costs are increasing at full throttle. The exchange rate has exceeded 25, this will pull up the construction inputs from iron to cement. Another element is labor wages. With the increase of the minimum wage, such costs will also put pressure on the sales price.

Many contractors (constructors) who normally used to build houses for lower and middle income have already withdrawn from the market. Because the cost increases have become so high that there are no citizens who can afford the housing they produce. The market is turning at a low volume with the production and sale of houses over 8-10 million liras, normally called luxury. When the numbers are high, we see a decline in sales numbers. But cost increases do not allow the price to go down.

2-When the exchange rate exceeds 25, we will experience an increase in inflation due to exchange rate volatility in the autumn. This situation will activate the ‘accumulation of goods against inflation’ mechanism, which has been stopped in the last 6 months, again.

Housing and land investments of upper income groups and vehicle investments of middle income groups who cannot afford a house will increase. This increase in demand will push up prices.

3-A very strong factor that plays a role on housing and rents is the Arabs and Afghans who have entered our country. The number of foreigners entering through the borders will increase even more after the AKP’s election victory. Housing and rental demands of foreigners will also push up prices in the market.

4-A factor that causes the price to remain high is the fact of the earthquake. Strong earthquake expectations in Marmara and Aegean are an important motivation that increases the demand for zero structures. For this reason, the demand for houses with good projects is increasing no matter how much interest (rate) there is.

5- One thing that should not be forgotten is that during the AKP period, we said that the middle income group was finished. You are either poor or rich. The demands of the rich listed above keep the price high. Lower earners, on the other hand, are in a rush to buy food that will only sustain their lives as of now. They no longer have a claim.

IN NEW PERIOD PAID, PENSIONERS and TRADESMEN HAVE NO CHANCE

If you are paid in the new period, if you are retired, if you are tradesmen (small business owners), you have no chance. The reason is you have no priority in income distribution.

Therefore, the thesis that goes “with the increase in interest, the housing demand decreases” does not apply any more. Even if the housing price increases, there is a mass of people who demand it with a great appetite. Who are they? They are the privileged section whose income distribution mechanism works in their favor.