Turkish Lira Inflation and its Relation with the Real Estate Market
Turkish Lira Inflation and its Relation with the Real Estate Market
The term of “Turkish Lira against the US Dollar” has been the most popular on all search engines around the world, especially for those interested in Turkey’s promising real estate market or house for sale in Istanbul or buying apartments for sale in Turkey in general, so the big question now is: In Turkey is it a good idea now to buy a real estate, especially after the sharp decline of the Turkish lira, or is this idea is a combination of recklessness, risk and economic suicide?
Before we answer these crucial questions, first of all this information is confirmed: The sales of real estate to foreigners increased during the first quarter of this year by 81.5% compared to last year, with the sale of about 9618 apartments worth 1.3 billion dollars! What do you think now? Do I tell you this a bit reassuring? Well … you explain that.
Fixed facts about the real estate market in Turkey
Before we answer the previous questions and justify our advice to you not to fear the fluctuations of the currency of Turkey against the dollar, let us see together a set of facts fixed and backed by facts and figures about the Turkish real estate market and its advantages and how to make the most of it.
First: the Turkish real estate market is a local market, with Turkey’s real estate market depending for only 1.59% of foreign investment. According to the statistics of the Turkish Statistical Institute for 2017, there are 22428 real estate units were sold to foreigners in Turkey out of 1409314 real estate units that were traded last year, that is, the volume of real estate sales to foreigners formed only 1.59% of the total movement of the Turkish real estate market.
Second: the pricing of real estate in Turkey depends on several factors, the most important of which are the cost, the supply and demand equation, the duration of the project implementation, the location, the view, the payment plans, and finally the foreign demand for real estate. Therefore, this latter factor is only one factor within a wide range of factors Others that will not be affected by any fluctuation of the currency.
Third: real estate prices have not yet been affected by the devaluation of the currency. In general, in all sectors dependent on the domestic market and the real estate sector, one of which has been shown previously, prices in the markets have not yet reacted appreciably to changes in the Turkish lira exchange rate. Turkish real estate has not yet seen a significant rise in prices to compensate for the difference in the exchange rate of the Turkish lira, has increased the rate of price increases by only 5% so far, which means that foreign investments are not closely linked directly to real estate prices in Turkey.
Fourth: Real estate loans and interest rates play a big role in adjusting the balance to the stability of the real estate market in Turkey, where we cannot overlook the role of the government in a sector such as Turkish real estate sector, which depends on bank loans significantly, has recently reached the interest rate on mortgages to This has led to a decline in the purchasing power of real estate in Turkey and hence the low demand for property in Turkey in the short and medium term. At the very least, this lack of demand will ensure that the real estate prices in Turkey will not rise at least in the six months to come.
Fifth: Turkey has shown remarkable efficiency in overcoming crises. Over the past years, Turkey has experienced multiple crises. The real estate market has always adapted to and continues to grow. For example, after the failed coup attempt on 15 July 2016, the Turkish government, in cooperation with banks and private companies, The interest on real estate loans from 1.42% per month to 0.98%, which led to an increase in the demand for real estate again and re balance the supply and demand equation and thus the continued stability and growth of the Turkish real estate sector, which will be evident when you see the statistics of the real estate market in Turkey in the first half of 2019.
Sixth: The real estate sector is the “right son” in the Turkish economy, which always maintains high levels of growth, according to the statistics of the institution “Frank Knight”, the growth rate of the Turkish real estate sector for 2018 19.5% after the introduction of the annual inflation rate on the basis of the Turkish lira.
Seventh: an important fact that should not be overlooked is that real estate capital is doubling over the long term. With the increase in mortgage interest rates, rising inflation and the weak purchasing power of the Turkish family in return for population growth in Turkey, on real estate internally – which plays the key role in increasing real estate prices – will be low now. Thus, real estate will maintain its prices and return to rise after an average period of time, which means doubling the real estate capital of the properties sold now. The return on Istanbul real estate investment and real estate investment turkey market at general should be calculated over the medium or long term, not the short term, Turkish real estate money must not be less than 7 years when calculating the return on capital.
How do we make the best use of the current situation?
The risk of risk remains constant, but under these circumstances, investment returns are far higher than risk rates. The purchasing power of a foreign investor in the Turkish real estate market has increased by almost 50%, i.e. $ 150,000. Buy a luxury property in downtown Istanbul while in the same amount 3 months ago you could buy an average property in the outskirts of Istanbul! This is the opportunity. The drop in the Turkish lira has led many foreign investors to buy residential units in Turkey. Some real estate marketing officials in Turkey have explained that many of the real estate projects in Istanbul have achieved a great demand for buying property for sale in Istanbul in Turkish lira, Where the increase in the demand for purchase amounted to 20% compared with the purchase of real estate in Istanbul last year.
Another secret that can give you excellent flexibility and margin of security when you buy any property in Turkey, this secret is: Purchase by installments! So that you do not exceed the first installment 50% and the rest in installments for 3 years, and in these years you can monitor the performance of the Turkish currency and the price at the price, either continue to pay the installments if the pound remains low, or pay the rest of the amount in advance if the Turkish lira To increase over the coming years, thus reducing the risk to half, by making half of the amount you pay Lira and manage easily and in your favor, while the other half – which represents your purchasing power – has nothing to do with changes in the exchange rate of the Turkish lira in the future, The general rule in the Emerging Markets Real Estate says that the head of the annual real money growth rate is always higher than the decline in the value of the currency rate, which we have seen and actually realistic over the past years in the Turkish real estate market, the next years will be similarly after the stability of the exchange rate.
Foreign investors are the biggest gainers
It is noteworthy that the real estate market in Turkey is witnessing a number of years of interest from foreign real estate investors, which is clearly achieved for Arab investors in particular, if they now represent 80% of the total foreign real estate investors in Turkey, where Iraq comes in the forefront Countries investing in real estate in Turkey, followed by Saudi Arabia and then Kuwait, outperform Russia, which became fourth after Russia’s real estate investment in Turkey was relatively larger among other countries.
The Turkish law gives the right to the citizens of 182 foreign countries to invest in Turkish real estate, which proves the continuity of the flow of more foreign investors permanently, and note that most of the privileges and incentives granted by the Turkish government to foreign investors to buy real estate in Turkey were linked to the price of the dollar In Turkey, not the Turkish lira itself. The most important of these incentives is the purchase of a quarter-million US dollar property for Turkish citizenship. In this case, the Turkish side will benefit in some way because it is based on foreign investments and foreign currency Understand, it is also considered a substitute for borrowing from the International Monetary Fund.
In order to ensure that you have the best options available for your profit and save the value of your future property that you want to live or invest in Turkey, take advantage of our guidance and consultation completely free, which will give you our experts with pleasure and welcome, contact now. Contact us now.