Our Latest Real Estate Report for Turkey has been published.


The construction industry and other related sub-industries are the most crucial aspects of economy. The economic growth of the real estate industry that interacts with many other industries is especially significant at the macro level.

The multiplier effect of the construction industry has a considerable impact on domestic economies and even on the world economy, as was evident in the global crises of 2008.

The construction industry is highly affected by macro- and microeconomic conditions, and it is among the industries most influenced by changing conditions. Thus, we need to look into domestic and global macroeconomic developments so as to understand the sensitivities and trends.

It is clear that construction industry and variables of its components must be analyzed meticulously at certain intervals. At times, less significant variables have more considerable effect, whereas at other times, parameters that have a direct effect make more of an impact.

The concept of housing prices is another critical issue that is discussed on a micro basis. The outlook of the housing industry and whether the pricing is accurate constitute a critical indicator, not only for this industry but also for the economy as a whole. This is of vital importance for central banks and implementers of economic policy.

Even though a number of economic and finance methods exists on the analysis and formation of asset prices, it is still not possible to establish a correct price for all times and all places. This is mainly due to the rise of occasional predominant factors that are related to human and other relevant behavioral patterns, which are hard to measure. Furthermore, a homogeneous comparison becomes impossible since the housing projects in particular vary greatly from each other in terms of location, size and social means.

In the light of the analysis we have made in previous reports as well as the new one, we have determined that there is no "price balloon" in the Turkish Housing Market According to the analyses based on the latest data, price increases are on a reasonable trend in line with rising costs, and there is only a single region at risk of a bubble. Supply and demand balance appears to have begun to settle down with real price increases dropping to 53.49 percent in the January 2010-March 2015 period, down from 53.9 percent in the January 2010-November 2014 period in the previous Gaziantep-Kilis-Adıyaman region report. Demand from immigrants from countries such as Syria and Iraq can be cited as the main reason for the price increase in the Gaziantep-Kilis-Adıyaman region. The rise in prices is therefore the result of a specific condition, and it is limited to a region.

In contrast, there are regions in which house prices have fallen in real terms. For instance, prices declined by an average of 3.93 percent in the Artvin-Giresun-Gümüşhane-Ordu-Trabzon region (between January 2010-November 2014). In the same region, the decline slowed down somewhat, dropping to 1.86 percent between January 2010-March 2015. In the January 2010-November 2014 period, the Van-Bitlis-Hakkari region experienced a similar situation with prices falling by 5.02 percent. In the January 2010-March 2015 period, the decrease slowed to 4.41 percent. The drop in prices can be attributed to such factors as demographic elements, migration, lack of foreign investors and the income effect.

Housing demand and supply is becoming more stable in Turkey. An average of 1 million houses change hands annually, and there is also a need for 600,000 new houses annually. TurkStat data put the number of households at around 19,481,000. The average household size is 3.8 people. The rate of home ownership was 61% in 2013 and 60.9 percent in 2006. When taking into consideration the “natural” demand for housing brought on by a rising population, the potential becomes evident due to the fact that house ownership rate remains the same. On the other hand, depreciation period for homes is settling down around 15-20 years throughout Turkey.

There is a heightened need for housing for the middle- and lower-middle income groups. Conversely, demand from the upper-middle and luxury segments seems to slowing down.  However, occasional fluctuations in prices must not be labeled as either collapses or bubbles. All assets experience fluctuations; prices do not constantly increase or decrease. Growth will be maintained in the medium term as long as a stable and dynamic structure is preserved in our country and in the sector.

Following are the summary of some of the factors that will affect the Turkish Real Estate and Construction Industry throughout 2015;
  • After putting on hold their demand in the last quarter of 2013 and the first half of 2014, investors closed 2014 with record numbers in home purchases and carried the trend into 2015.
  • Istanbul is drawing attention from every corner of the world as a brand city.
  • There is work to turn Istanbul into a finance center.
  • Infrastructure projects are creating a center of attraction and interest. Among these, Körfez crossing, the 3rd Bosphorus Bridge, submerged tube tunnel under the Istanbul Strait, 3rd Airport, rail transport and metro projects introduced in almost every big city, and Kanal Istanbul project stand out.
  • The city surroundings are expanding and living spaces are growing as a result of improvements in transportation and means.
  • Urban transformation and related regulations are continuing.
  • Rural to urban migration is ongoing.
  • There is a natural demand created by a young population.
  • The notion of nuclear family has changed.
  • There is a common trend in our country, especially prior to elections, of people putting their home or automotive purchases on hold. However, this year the trend is reversed with both sectors remaining rather vibrant. The main reason may be explained with expectation of continuing rising demand in the future periods and with a form of protection by the consumers against foreign exchange-related fluctuations.
The industry remains volatile, thanks to the measures to encourage home purchases and savings.
There has not been much use for the Real Estate Certificates that were issued by the Capital Markets Board, in order to help the housing industry grow and to be used in financing real estate projects. Nevertheless, this financial instrument needs to be developed and supported so that demand remains dynamic and the industry receives the funds it requires under favorable terms.
  • The housing industry is projected to maintain its dynamism in the first half of 2015. A demand-driven, gradual rise may continue in prices. Nevertheless, external developments (e.g. the Fed decisions, domestic and geopolitical activities, changes in foreign exchange and interest rates in emerging countries) may create a temporary fluctuation in demand. In the coming six months, demand may be boosted for investment purposes in the regions where prices rise less than average throughout Turkey. A dynamic demand and flexible supply structure should be preserved particularly in Istanbul and also in cities such as Izmir, Ankara and Antalya.

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