Housing Sizzles On The Bosporus

Turkey's economic policymaking may be in disarray but it's housing market is hot.

The housing market was hot virtually everywhere in the world as the Covid-19 pandemic raged last year; but nowhere was the temperature as high as in Turkey, which led the Knight Frank Global House Price Index (HPI) for four consecutive quarters. New Zealand, a doomsday haven, came in a distant second.

The HPI tracks the movement in house prices across 56 countries using official statistics. The vast majority of countries (89%) saw housing price increases in 2020, and the average ticked up from 5.3% in 2019 to 5.6%. The last time the index exceeded 5.6% in annual growth was the first-quarter 2018.

Priti Pandey, associate director of programs at the School of Real Estate, RICS School of Built Environment, Amity University in Mumbai, attributes Turkey’s spectacular performance primarily to investors from Gulf countries buying real estate in response to the weak Turkish lira. “Property values are low in dollar terms in this scenario,” she says. “The Turkish government’s decision to postpone the imposition of the luxury housing tax for one year, to 2021, has further impacted house demand positively, although the Covid situation did set a cautious approach to investment.” She expects the trend to continue through 2021, fueled by growth expectations.

However, there is a downside, she cautions: Inflation, which has topped 15% in each of the past three years, according to World Bank data.