Turkish inflation set a record: in July it was already 79.6 percent compared to last July’s value. The outlier is due to the continuous devaluation of the Turkish lira and the economic consequences of the Russian occupation of Ukraine, and the rising energy prices also affect the construction market. There is also a shortage of rental housing, exacerbated by the 3.92 million refugees the country has taken in. To offset the negative trends, in addition to the rent freeze law passed in June, the Turkish government announced a large-scale social housing project that will come into effect from mid-September, writes EECFA, which researches the construction market of Eastern European countries.
Record inflation since the last quarter of last year is affecting construction work and the production of some industrial and agricultural products.
In June, construction costs rose by 105.73 percent and housing construction costs by 100.87 percent year-on-year. The consumer price indices and the domestic producer price indices changed by 78.62 and 138.31 percent, respectively.
And housing prices are growing even faster than construction costs.
According to the May 2022 statistics of the National Bank of Turkey, the annual increase in the national average of housing prices was 145.5% (44.63 percentage points more than housing construction costs). The reason for such a large difference between housing prices and housing construction costs is probably the lack of supply, which arose due to the high demand for housing.
Last year, the number of occupancy permits issued was 627,000 fewer apartments than would have been necessary for the 725,700 newly formed households in 2021. In the first half of 2022, however, the number of housing starts decreased by 11%, and the number of completions increased by 8% compared to the same period of the previous year. The decline in starts was smaller, and the increase in completions was higher than the average for all buildings. The latter can be related to the backlog of buildings under construction, which arose due to the rise in housing prices.
Demand may pick up
The crisis in the apartment rental market may also be related to the large number of refugees that have accumulated since 2011. According to the statistics of the United Nations High Commissioner for Refugees, 3.92 million refugees live in Turkey in August 2022 (3.6 million from Syria and 320 thousand from other countries) – this could be up to 1 million households. Since most refugees live in rented accommodation in cities, it seems that more rental accommodation has not been built in such a short time.
The Turkish government froze rents in June 2022 (until July 1, 2023) (rent increases were capped at 25%). After that, a large-scale social housing program will be launched nationwide, which will be managed by the Housing Development Directorate from mid-September. It is a central government organization that has built about 1.1 million homes in all 81 provinces on state-owned land over the past 24 years. About 86% of the apartments built by the Board were sold with the mortgages it took out to moderate-lower-income households that did not own an apartment. Although the housing program will take some time to complete, it will stimulate demand for construction work and building materials.
Source: Napi.hu by www.napi.hu.
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