Despite facing economic headwinds and battling hyperinflation, Turkey’s property market put up a strong showing in 2023 – which will continue through the second half of 2024.
Beyond the impressive nominal price increase shown by Turkish properties lies a more interesting and involved investor narrative.
As we look ahead to the second half of 2024, Turkey’s property market finds itself at a crossroads where foreign investors have multiple choices.
Turkey property market – 2023 in review
On the surface, Turkey’s housing prices skyrocketed in 2023.
Nationwide property prices soared 86.46% year-over-year in October 2023, reaching an average of TRY 30,036 ( approx. $998 USD) per square meter, according to the Central Bank of the Republic of Turkey (CBRT).
That increase followed an eye-popping annual price increase in Turkey property values of:
- 179% in 2022
- 64% in 2021
- 32.6% in 2020
- 2.9% in 2019
However, when factoring in Turkish inflation, which registered an extraordinarily high 64.8% in December 2023, real house price growth tells a different story.
Adjusted for inflation, Turkish property prices rose a more moderate 12.4% year-on-year in October 2023 – and this adjusted growth was reflected across Turkey’s major property markets:
- Istanbul – in Turkey’s largest city and most expensive market, nominal prices jumped 66.7%, but real prices inched up just 3.3% year over year
- Ankara – nominal prices skyrocketed 94.3% while real prices climbed 20.4%
- Izmir – nominal prices surged by 77.2%, but real appreciation was a tamer of 9.8%
New construction prices exhibited slightly higher real growth at 18.4% compared to existing inventory real price growth of 15.8% year-over-year in October 2023.
With the effects of hyperinflation removed, it becomes apparent that Turkey’s property market is experiencing actual and profitable growth but at a much more modest pace.
Demand slows
Even as Turkish property prices marched higher in nominal terms, housing demand in Turkey lost some steam in 2023.
Total home sales decreased 14.9% year-over-year to 1.09 million units in the first eleven months of 2023. This follows slight annual declines of 0.4% in 2022 and 0.5% in 2021.
The slowdown was felt across the board, with double-digit drops in sales of new houses (-14.1%) and existing houses (-15.2%) in the first eleven months of the year.
Most of Turkey’s significant markets experienced some loss of interest:
- Istanbul [16% of market share] – sales plummet 21.5%
- Ankara (9.5% market share) – sales fell 6.2%
- Izmir (5% share) – witnessed a 19.7% decrease
- Antalya (5% share) – recorded a 16.3% drop
- Bursa (3.7% share) – saw sales slip 13.1%
- Mersin (3% share) – sales declined 10.5%
Foreign buyers primarily influenced the slowdown in demand. Foreign property investment plunged 46.1% year-over-year to 32,941 units in the first eleven months of 2023.
This marked a sharp reversal from the robust growth of 15.2% in 2022 and 43.5% in 2021.
As a result, foreign buyers’ market share nearly halved from 4.8% in 2022 to just 3% in the first eleven months of 2023.
Russians remained the biggest spenders in the Turkish property market, accounting for 30.2% of foreign purchases from January to November 2023.
Asian, European, and North American investors followed.
Antalya (36.7% share) and Istanbul (31.7%) remained the trending and chic destinations for foreign property investors.
Despite easier foreign ownership rules and updating the citizenship by investment program, global and domestic economic concerns dented foreign appetites for Turkish real estate.
The citizenship by investment minimum threshold was raised from $250,000 to $400,000 [USD] in June 2022 – likely the most significant influencer contributing to the drop-off in foreign purchases.
Turkey’s property market rebounds
While demand faltered, residential construction staged a comeback in 2023.
In the first three quarters, the number of dwelling units granted construction permits surged 24.1% year-over-year to 520,209 units:
- One-dwelling building permits climbed 8.1%
- Two-or-more-dwelling building permits soared 25.5%
- Three-and-more-dwelling permits decreased 14.3%
Overall, residential construction permits increased by 8.1% compared to the same period in 2022.
The permit figures mark a strong rebound in housing and spurred renewed developer interest despite the temporary slowdown.
Rental yields stay strong
Even with the mixed dynamics at play, Turkey continued to offer attractive rental yields to property investors in 2023.
As documented by Astons Istanbul office and reflected by other global luxury real estate experts, nationwide gross rental yields averaged a healthy 6.52% in Q3 2023.
Istanbul apartments generated gross rental yields ranging from 2.84% to 9%, with a citywide average of 6.21%, up slightly from 5.99% in 2022. Other major markets posted similarly robust yields:
- Ankara: 5.37% to 10.13%, averaging 7.15%
- Antalya: 3.16% to 8.03%, averaging 5.05%
- Izmir: 4.8% to 8.16%, averaging 6.51%
- Adana: 5.28% to 9.5%, averaging 7.26%
- Bursa: 6.16% to 7.9%, averaging 7.05%
- Kayseri: 5.17% to 7.24%, averaging 6.16%
- Konya: 5.43% to 8.18%, averaging 6.81%
Turkey’s comparatively high rental yields and reasonable transaction costs remain extremely attractive to foreign real estate investors seeking to capitalize on a strong rental market.
Policy & regulatory landscape
Recent fiscal and regulatory changes have shaped Turkey’s property market in recent years.
The luxury housing tax on properties valued over TRY5.25 million [approx. $160K] came into force in January 2021, with progressive rates ranging from 0.3% to 1%.
In June 2022, the minimum real estate investment threshold for Turkey’s citizenship by investment program increased from $250,000 to $400,000.
Similarly, the minimum property investment required to obtain residency through real estate increased to $200,000 across all cities, effective October 2023.
Turkish currency concerns
Turkey’s currency concerns form the backdrop for the country’s housing market.
Annual inflation averaged a staggering 62% from 2022-2023, up from 15% in the 2017-2021 period.
The Turkish lira has been in virtual freefall, shedding nearly 70% of its value against the US dollar from December 2019 to December 2022.
Unorthodox monetary policy, featuring interest rate cuts in the face of soaring prices, exacerbated lira weakness.
The CBRT belatedly changed course and started hiking rates aggressively in 2023.
In August 2023, the Turkish lira began to rebound following an impressive rate hike by the CBRT. The hike resulted in the lira jumping 8% and more than 3% against the US dollar.
Turkey housing markets in 2024
The CBRT’s shift to aggressive interest rate hikes to rein in inflation and stem the lira’s slide could significantly influence Turkey’s real estate market in the second half of 2024.
On the one hand, the rate hikes should help stabilize the lira and tame rampant inflation – restoring confidence among domestic and foreign buyers, who are aware of the market’s dynamic moves.
A stronger lira would also boost the purchasing power of local buyers, potentially spurring demand and competition with foreign buyers.
However, the flip side is that higher interest rates would make mortgages more expensive for locals, thus dampening domestic demand.
This could price out domestic buyers, but it could also – by default – produce a rental market surge.
Foreign buyers, who have been critical market drivers in recent years, may also pull back if the lira strengthens significantly, as Turkish real estate would become more expensive as a result.
The primary driver for foreign-based investments has been the fact that Turkey is a ground-floor real estate opportunity—literally, where millionaires live like billionaires.
No where else in Europe are investors able to get the value for dollar proposition that Turkey provides – especially on the Mediterranean coastlines.
Developers may also feel the squeeze of higher borrowing costs, potentially leading to a slowdown in new construction.
This could help rebalance the market and prevent oversupply, but it could also lead to job losses in the construction sector, a key engine of economic growth for local Turkish economies.
Much will depend on the pace and consistency of the CBRT’s tightening cycle and the government’s broader economic and fiscal policies.
If the rate hikes are sustained and coupled with prudent fiscal measures, it could lay the foundation for a more stable and balanced real estate market for the foreseeable future.
However, if the tightening is short-lived or undermined by contradictory policies, it could fuel the dynamics of the market’s history.
The CBRT’s hawkish turn could be a headwind for Turkey’s property market, with cooling demand and slowing price growth.
However, if it succeeds in stabilizing the macroeconomic environment, it could pave the way for a healthier, more sustainable market in the long run.
As always, the key will be striking the right balance between curbing excess and supporting growth.
Turkey property market – Stability & opportunity
Despite the challenges posed by high inflation and interest rate hikes, Turkey’s real estate market is poised for a resilient performance throughout 2024, offering compelling opportunities for savvy investors.
While nominal price growth is likely to moderate, it is still expected to remain robust in the 15-20% range, outpacing inflation.
This translates to a 3-5% real price appreciation, providing a solid foundation for gains.
The slowdown in demand witnessed in 2023 is likely temporary as the market adjusts to the new interest rate environment.
Sales are projected to rebound by 5-10% in 2024, driven by pent-up domestic demand and a gradual recovery in foreign buying activity.
The CBRT’s rate hikes, while dampening short-term demand, are likely to yield long-term benefits in the form of greater macroeconomic stability.
As inflation cools and the lira stabilizes, consumer and investor confidence is expected to improve, underpinning a more sustainable demand growth trajectory.
This will be driven by stabilizing interest rates, rising incomes, and government initiatives to boost domestic homeownership – all of which sophisticated investors, who are already properly positioned, will benefit significantly from.
The supply picture is also encouraging. While rising borrowing costs may temper the pace of new development, the healthy pipeline of projects with construction permits secured in 2023 should ensure a steady stream of new housing supply in 2024.
This will help keep the market balanced and prevent excessive price appreciation.
The luxury segment is expected to outperform as global HNWIs continue to seek portfolio diversification and to hedge against inflation in their own countries.
The recent increase in the minimum property value threshold for the luxury tax to TRY5.25 million [approx. $160K] should support demand in this segment.
Foreign buying activity will likely pick up steam in the second half of 2024 as global economic conditions improve and investors seek higher-yielding opportunities.
Turkey’s attractive citizenship by investment program and unparalleled value-for-dollar property prices compared to other Mediterranean destinations will continue to draw interest from global HNWIs.
The rental market is expected to remain robust, with gross rental yields forecast to average 6.5-7% nationwide.
Istanbul and other major cities are likely to see yields at the higher end of this range, making them particularly attractive for buy-to-let investors.
In addition, Astons’ guaranteed rental income programs streamline the process for the ROI-focused investor.
While 2024 may bring some near-term challenges, the longer-term fundamentals of Turkey’s real estate market remain unrivaled.
With a young and growing population, a strategic location bridging Europe and Asia, and a dynamic economy, Turkey offers investors the potential for revenue, lifestyle, and capital appreciation.
As the market stabilizes and confidence returns, 2024 could mark an opportune moment to invest in Turkish real estate ahead of the next upcycle.
Of course, risk is when ROI is at its apex – a market in which any investor can make easy money is a market with small and short-lived returns.
But for those with a long-term horizon and an appetite for growth, Turkey’s property market promises to be a rewarding investment for years to come.
Turkey’s CIP: A gateway to opportunity
Turkey’s real estate market and the Turkey Citizenship by Investment (CBI) program are inextricably linked, with the latter serving as a powerful catalyst for the former.
The CBI program enables foreign investors to obtain Turkish citizenship by purchasing property worth at least $400,000 – and has been the single most revolutionizing force in the country’s housing market.
Since its introduction in 2017, the CBI program has attracted a flood of foreign investment.
In 2021 and 2022, foreign buyers accounted for an impressive 4.8% of total home sales, injecting much-needed liquidity into the market and supporting price growth.
While foreign purchases took a breather in 2023 due to global economic headwinds, they are expected to rebound strongly in 2024 as the world economy recovers and investors seek attractive yield opportunities.
With its relatively low investment threshold and fast-track process, Turkey’s CBI program will remain a key draw for the global HNWI community.
Specifically, Astons’ guaranteed income programs through real estate for citizenship or residency have remained in strong demand.
The CBI program’s benefits extend far beyond investing in one of Europe’s best real estate opportunities.
Foreign direct investment helps support Turkey’s balance of payments, bolster foreign exchange reserves, and stimulate economic growth.
This, in turn, creates a virtuous cycle, as a stronger economy and more stable currency boost confidence and purchasing power, further underpinning housing demand.
The influx of foreign buyers has spurred the development of high-quality, internationally-focused projects, raising the overall standard of the country’s housing stock.
Looking ahead to the end of 2024, the CBI program is expected to be a key pillar of Turkey’s real estate market growth.
Turkey’s confluence of affordable prices, strong rental returns, and streamlined citizenship process will continue to prove irresistible.
The CBI program also boasts outstanding ancillary benefits, such as visa-free travel to over 110 countries and the right to live, conduct business, bank, and travel using your alternative legal Turkish identity.
Astons – Istanbul office connects private clients to opportunity
For stand-alone real estate investment or paired with citizenship or residency acquisition, Astons’ Istanbul office has been the go-to partner for global HNW property investors.
Turkey’s CBI program and real estate market offer a compelling proposition for HNW investors seeking a foothold in one of the world’s most dynamic and strategically located economies.
Astons helps investors navigate Turkey’s property market to obtain the property (or properties) that address all investment concerns and demands – via Astons’ tailored and proprietary process that mirrors the standards of the US and UK markets.
Astons’ local experts and boots-on-the-ground team study the intricacies of the Turkish housing market daily to expertly advise and direct our clients with the most current information and trends.
Partnering with Astons’ Istanbul office means investors leverage a streamlined all-in-one solution that provides a CBI application cycle averaging only three to six months for approval.
This makes it one of the fastest citizenship programs in the world and an excellent European Plan B with an unmatched ROI element.
Real estate investment nor the CBI program requires any physical residence, and the document checklist is minimal, paired with high degrees of financial privacy – you simply need to transfer the money from your bank to Turkey.
Turkey is a ground-floor property investment, but for how long—no one knows. Schedule your Free Confidential and Comprehensive Consultation with Astons today.