ISTANBUL (AP) — Hatice Erdal has had a week to vacate her rental home which is set to be demolished. The maid and her husband both earn minimum wage, and even with their salaries combined, they can’t find anything within their budget in Istanbul’s exorbitant property market.
“I found a house, it was 12,000 liras ($645), another at 10,000 liras ($537). I can’t pay for this. … What will I eat and drink? Erdal talked about monthly rents. “If it was hot, I would live in a tent, but I can’t do that either. I don’t know what I’m going to do.
Economic turmoil caused by soaring inflation of almost 85% plunged Turkey into one of its worst real estate crises. Soaring prices have made finding affordable homes to rent or buy an uphill battle for many, especially millions earning a monthly minimum wage of 5,500 liras ($295) who also struggle to cover the costs of food, energy and other expenses..
While rising construction costs and inflation have pushed up house prices around the world, Turkey’s real estate crisis has been exacerbated by President Recep Tayyip Erdogan’s unorthodox policy of lowering interest rates despite high inflation. — contrary to traditional economic thought. This has prompted many to invest in real estate to preserve their savings against rising inflation. With the housing shortage, prices have skyrocketed.
People chose to buy real estate instead of keeping their savings in low-interest bank accounts. Turkey’s central bank cut interest rates to 9% despite inflation, which independent economists said hit 170.7% in November. Erdogan believes high borrowing costs drive up prices, while most economists say raising rates is the traditional antidote to inflation.
Foreign buyers have also flooded the Turkish property market, attracted by the Turkish lira which has lost around 28% of its value against the US dollar since the start of the year – in addition to suffering even worse blows in 2021.. They also have the possibility of acquiring Turkish nationality through real estate purchases.
Home sales to foreigners rose 20.4% between January and November, compared to the same period last year, according to the National Institute of Statistics. The majority of buyers were Russian citizens, followed by Iranians, Iraqis and Ukrainians.
The crisis pushed Turkey’s house price index up nearly 190% in September from a year earlier, central bank figures show. The annual increase was a staggering 212% in Istanbul, Turkey’s most populous city.
Inflation and rising house prices have also led to unprecedented increases in rents.
“It’s the first time we’ve seen something like this, that we’ve seen prices go up so much,” said real estate agent Kenan Altinay. “Every year we would see a difference of 20% or 25%, but this year it has reached 200%.”
In a bid to control prices, the government has imposed a 25% cap on rent increases, but few landlords adhere to the rule as they try to keep their incomes in line with inflation.
Property lawyer Idil Bora says the courts have been overwhelmed with eviction lawsuits over disputes over rent increases.
“The civil courts of peace, which are responsible for dealing with these cases, have such a heavy workload that hearing dates are set for five or ten months later,” she said.
It left the likes of Duygu Ataman Gunay unsure of what’s next. Gunay, an architect, fears her landlord will raise her rent more than she can afford when it comes up for review next month.
“I don’t know what awaits us in January,” she said. “Either our rent will be tripled or (the landlord) will put the house up for sale.”
She said the cost of rent, food and clothing had doubled or tripled and that white-collar workers like her had not received pay rises that keep pace with rising prices.
“Our purchasing power has totally dropped,” Gunay said.
Fraser reported from Ankara, Turkey.