‘Owning a home is a dream’: The housing crisis hits Turks ahead of polls

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Serhan Ulkucu and his wife had to negotiate hard with their landlord before they could make a deal to extend the annual lease on their family home in Istanbul’s Bostanci district.

The monthly rent for the family’s two-bedroom flat, where they live with their seven-year-old son, has risen 147 percent in a year, from 4,650 Turkish lira to 11,500 lira (about $600) — 25 percent more than the minimum wages in Turkey.

“I recently lost my job and my wife’s salary can pretty much pay the rent,” Serhan, 41, who used to work for an e-commerce company, told Al Jazeera.

“We will try to live off the statutory severance pay I received until I find a new job; I don’t know what we would do if I didn’t get that,” he said, adding that new tenants pay about 15,000 lira ($770) for similar apartments to theirs.

Turkey has been experiencing high inflation and an economic downturn that have hit the country particularly hard since last year ahead of crucial presidential and parliamentary elections that will test public support for Turkish President Recep Tayyip Erdogan on May 14.

While the ongoing cost-of-living crisis is affecting all aspects of life, the cost of housing in particular has significantly outpaced already high headline inflation.

Property prices across the country registered an annual increase of 141.5 percent in Turkish lira in February (PDF), according to data from the Turkish central bank. Real estate prices are up about 75 percent in US dollars over the same period.

The colossal rise in property prices is happening despite a continued decline in property sales – in March sales fell 21.4 percent year-on-year, according to the Turkish Statistical Institute.

According to a report by the Center for Economic and Social Research (BETAM) at Bahcesehir University in Istanbul, the cost of renting a home across Turkey also increased by 157 percent year-on-year.

Meanwhile, official data showed annual inflation of 50.5 percent in March, down from a high of 85.6 percent in October, while the Inflation Research Group (ENAG), an independent group of experts, recorded inflation in March as 112.5 percent – ​​well behind the housing rate.

The government is doing everything it can to alleviate the housing crisis in the run-up to the elections.

In June 2022, rent increases were capped at 25 percent for people who lived in the same flat for less than five years. The initiative is valid for one year, until July.

However, Ulkucu’s family has lived in their flat for more than five years, which legally gives their landlord the right to charge rent at the current market rate, even if that means a rent increase of more than 25 percent.

Ahead of the upcoming polls, Erdogan has also been trying to get more working and middle-class Turks onto the housing ladder. Two ambitious construction projects have been announced specifically for those who don’t own property, and the president also pledged to build hundreds of thousands of new homes nationwide by 2028.

On Tuesday, Erdogan said in a campaign speech in the southern city of Antalya that his government would announce more housing projects and further regulations to protect citizens.

“Due to new housing projects and legal sanctions [protecting tenants] it will be us again who will solve the problem of extortionate prices,” the president said.

Purchasing power decline

Meanwhile, however, the Turks feel the pinch.

All three Turkish citizens who spoke to Al Jazeera said their purchasing power had fallen significantly since last year, with the rise in their income failing to catch up with the rise in spending in the country, most notably housing prices.

Bora Cikikcioglu, an engineer who has been working for 10 years, said his rent has risen from 4,000 lira in his previous flat a year ago to 10,000 lira (about $514) in the flat where he now lives.

He added that people who stay longer in the same property are often hit by softer rent increases.

“The biggest problem is finding a place to live without a bizarre rent if someone loses the apartment he or she is in,” the 38-year-old told Al Jazeera.

“Tenants do not feel safe in this environment,” added Cikikcioglu.

Both Cikikcioglu and Cagan, a long-term resident of Istanbul, said buying a home is a “dream” for salaried Turks.

“For a person who has been actively working for more than 20 years, it is impossible for me to live alone in the neighborhoods of Istanbul that are feasible for me. [for commuting to work]42-year-old Cagan, who did not want to share his last name, told Al Jazeera.

“If I can’t pay the rent, I have to live alone in Istanbul, how can I buy an apartment in the current market conditions?” he asked.

Cagan, Ulkucu and Cikikcioglu believe that inflation will not stop and housing rents will continue to rise in the near term, regardless of the outcome of the upcoming election.

The monthly minimum wage in Turkey was raised to 8,506.80 lira ($437) in January, about 55 percent more than the previous increase in July and about 100 percent more than in January 2022.

But due to the devaluation of the Turkish lira, the money does not go as far as it used to.

The currency crisis first occurred in 2018, before hitting the country hard in the 2020s, leading to a fall in the lira against reserve currencies, such as the US dollar and the euro.

The lira is down about 47 percent against the US dollar since early 2022, about 164 percent since January 2021, and more than 400 percent since early 2018.

Causes of the housing crisis

Seyfettin Gursel, an economics professor and the director of BETAM, told Al Jazeera that the roots of Turkey’s current housing problems lie in the 2018 crisis, which led to a massive fall in prices at a time when huge amounts of unsold housing stock had accumulated in the country.

“New housing projects were strongly phased out at the time [due to the crisis]. The construction sector lost a third of its employment in two years. As a result, the supply of homes for sale eventually decreased,” he told Al Jazeera.

Erdogan’s government has defied international orthodoxy on how to deal with high inflation. Instead of raising interest rates, as central banks have done in much of the world in recent years in an effort to reduce inflation by encouraging saving rather than spending, he has lowered interest rates.

However, the Turkish president has repeatedly said that he believes inflation itself is caused by high interest rates, calling himself the “enemy of interest rates”.

Last month, he reiterated that interest rates would fall as long as he remained in power, and that inflation would fall with them.

The central bank has cut its key rate from 19 percent to 8.5 percent since the end of 2021, ignoring skyrocketing inflation.

Experts have said that this has prompted people to invest in real estate as saving Turkish liras would most likely cause their value to fall due to continued currency depreciation and inflation. Meanwhile, the more people invest in real estate, the more house prices rise.

“The Turkish central bank has lowered interest rates…while inflation is rising rapidly. To protect savings in Turkish liras against inflation, demand for housing has increased,” Gursel said, adding that a significant fall in mortgage rates in 2020 also boosted demand for real estate.

That was the result of a government initiative whereby Turkey’s three largest public banks issued mortgages and other types of loans at historically low interest rates, in an attempt to revive the economy after the economic shock of the COVID-19 crisis. 19 pandemic.

Backlash against foreign buyers

Foreign buyers, who have flooded the Turkish property market in recent years, are also a factor in the rising rates.

They have been lured to Turkey by the fall of the lira, as well as relatively easy and short access to Turkish citizenship through the purchase of houses.

According to Seyfettin Gursel, the increase in home sales to foreigners has led to “a huge price increase”, especially in tourist regions, such as the southern provinces of Antalya and Mersin.

In BETAM’s latest report on house prices in March, the annual rate of increase was 137.5 percent in Antalya and 139 percent in Mersin.

The war between Ukraine and Russia, as well as the partial mobilization announced in Russia, have also prompted their citizens to consider buying real estate in Turkey.

According to the Turkish Statistical Institute, home sales to foreigners increased by 15.2 percent in 2022 compared to the previous year.

The highest number of sales were made to Russian citizens, followed by Iranians and Iraqis, the institute said, with Ukrainians in sixth place.

Erdogan’s main rival in the May 14 polls, Kemal Kilicdaroglu, who blames “Erdogan’s capitalism” for the housing crisis, has pledged to ban property sales to foreigners until the housing crisis for Turkish citizens is resolved.

Respondents to a recent survey appeared to support Kilicdaroglu’s pledge, including voters who supported the AK party in the last election.

Kilicdaroglu also recently pledged to quadruple the stock of social housing within five years and keep social housing rental costs at 20 percent of the minimum wage.

February’s massive earthquakes in southeastern Turkey destroyed or damaged more than 200,000 buildings in the affected regions and forced many residents to migrate and increase demand in other cities.

The effect on people residing in the 10 provinces affected by the quake varied depending on the extent of destruction.

Gursel said demand for real estate is likely to fall, with fears of future earthquakes and many Turks distrusting the housing market.

He added that government policies to increase housing — whether through new projects or urban transformation projects in preparation for earthquakes — will bring more supply to the market.

This dynamic “could stop the real rise in prices,” he told Al Jazeera, adding that the movement in the lira’s exchange rate will affect prices, with supplies for the construction industry often being bought with foreign currency.

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