Turkey tops Europe in housing price increases

The housing price index for May 2021 was released by the Central Bank of the Republic of Turkey (TCMB). According to the index, housing prices rose by 3.9 percent in May compared to the previous month and by 29.1 percent compared to the same month the previous year.

Wednesday July 21 2021 10:44 am

This file photo shows a view of the Karaköy district of Istanbul.

K. Murat Yılmaz / Duvar English

According to the most recent data from the European Statistics Office (Eurostat), Turkey has experienced the greatest increase in housing prices in Europe with a 32 percent increase over the past year, while in the first quarter of 2021, the European Union experienced an average of 6.1 percent increase over the same period the previous year. Turkey was also on top in terms of rent increases over the previous year.

Following Turkey, the countries with the highest increases in housing prices were Luxembourg with 17 percent, Denmark with 15.3 percent, and Lithuania with 12 percent.

Construction material prices skyrocketed

Significant price increases occurred in units that affected construction costs in 2021. Prices for construction materials, particularly iron and cement, have risen at unexpected rates especially due to the depreciation of the lira. The cost of building a house increased as a result of the price hikes, which was directly reflected in housing prices.

The construction cost index increased by 4.41 percent from the previous month and by 39.56 percent from the same month the previous year in May according to TCMB data. The material index increased by 6.32 percent over the previous month, while the labor index fell by 0.03 percent. In addition, when compared to the same month the previous year, the material index increased 49.45 percent and the labor index increased by 19.97 percent.

Housing price increase nearly double inflation rate

After setting a record at 32 percent in April, the housing price index (KFE) increased by 3.9 percent in May 2021 compared to the previous month and by 29.1 percent compared to the same month the previous year, according to data released by the Central Bank of the Republic of Turkey (TCMB). The annual price increase rate of the TCMB in housing prices is nearly double of the official inflation rate.

According to TCMB’s data, while the price index of new houses increased by 32.3 percent on an annual basis in May, new house prices in Istanbul were 25.5 percent higher, and in Ankara 35.2 percent; In İzmir, on the other hand, the index increased by 25.8 percent as the countrywide average increase in non-new housing prices was calculated at 28 percent.

Biggest price increase in İzmir

The biggest increase on an annual basis occurred in İzmir. Izmir was followed by Istanbul and Ankara.

While the annual increase in housing prices in İzmir was recorded as 29.7 percent in May, the increase in Istanbul was recorded as 27 percent and in Ankara as 26.4 percent.

According to industry sources, the main reason for the rise in housing prices in İzmir was the high demand for housing following the recent earthquake's destruction of homes.

Meanwhile, the unit price per square meter of residences in Istanbul was 6,677 liras, 3, 292 liras in Ankara, and 5,308 liras in İzmir, while the average for Turkey was recorded as 4,415 liras by the TCMB.

Number of unsold houses on the rise

Despite campaigns and low interest rates last year promoted by the government, especially via state banks, according to a report compiled from official housing statistics by the Turkey Contractors Union, housing ownership in Turkey fell from 58.8 percent in 2019 to 57.8 percent in 2019.

Moreover, the Contractors Union also announced that there are more than 1.5 million vacant houses waiting to be sold across the country. According to the union, there were 1.46 million houses waiting to be sold at the end of 2020, and 1.54 million in the first quarter of 2021.
Cheap housing loans not a solution

Meanwhile, it is rumored that the government is planning to reintroduce new low interest rates for housing loans to revive the industry, as it did in the early stages of the pandemic. Not everyone is impressed by this plan.

“This will lead to a further increase in housing prices. Would such a decision result in more house sales? That is quite questionable,” President of the Chambers of Engineers (İMO), Taner Yüzgeç told Duvar English.

“Low interest rates would give another lifeline to construction companies and contractors as it would enable them to sell some of their houses, but I believe that would be limited. With the inflation rate and costs during the financial crisis we are experiencing, I do not believe the industry can be revived with cheap credit,” he concluded.