Inflation in Turkey – What Does It Mean?

Anyone following international news will probably be aware inflation in Turkey has had a significant impact and has perhaps wondered what it means for the property market.

Of course, the country is by no means alone in its current economic battle. The COVID pandemic and the war in Ukraine have had an impact around the globe and not just on the nations around the Black Sea.

However, political upheaval in the build-up to presidential elections in Turkey in the spring of 2023 played a part in exacerbating the country’s struggles to some extent.

Turkey’s leaders also took an unconventional approach to fighting inflation, cutting interest rates rather than raising them. This gave international money markets the jitters, sending the lira plummeting against the US dollar as a result.

Imports therefore became more expensive, costs rose and it wasn’t long before the impact was evident in supermarkets, shops, restaurants and in the spiralling cost of utilities and fuel.

The cost of living

With inflation running at over 80% at one point, a dramatic rise in the cost of living sparked equally alarming rises in rents. Asking prices for properties have also more than doubled within the last 12 months as vendors try to squeeze as much out of their assets as possible.

But, since 2020, it hasn’t just been the global financial situation influencing the Turkish property market. People relocating out of the bigger cities during the COVID19 pandemic led to recent demographic changes, particularly in desirable locations along the Aegean and Mediterranean coasts.

The devastating earthquakes in the south-east in February 2023 also prompted a migration away from the seismically active areas as well as a big rethink for the construction industry which will now be obliged to spend more on the resilience of new buildings.

Fighting back

So, if you’re in investor with an eye on property or if you were thinking of retirement somewhere in the Turkish sun, does that mean you should be looking elsewhere? Our answer is no, not necessarily.

First of all, the government has already begun to introduce measures both to combat inflation and to influence the property market in particular.

It has recognised that a home of their own is fast becoming a pipedream for the nation’s first-time buyers and that rents need to be controlled. As a result as cap of 25% has been put on rises in the latter.

The government has also tried to put more money in the pockets of the average Turk by doubling the minimum wage and by reducing the retirement age, giving older citizens earlier access to their pensions.

It’s also funding ambitious building projects to rehome those displaced by the earthquakes, has offered financial support for low and middle-income families looking for a place to live and has introduced restrictions on residences for foreigners in areas considered already saturated by immigrants.

During the presidential elections, the opposition was even proposing a five-year moratorium on property purchases by foreigners, blamed for pushing prices higher than the average Turk can afford. However, to date, there’s no indication that the new administration will cherry-pick that particular policy – at least not across the board.

Will it work?

It’s currently hard to be sure if the government’s strategy will actually work. Much depends on whether or not it delivers on its promises.

Some may also point out the extra money going into Turks’ pockets is being removed again through new taxes and unfettered rises in utility costs.

But, from the perspective of a foreign investor, property in Turkey remains a viable option as, despite the recent rise in asking prices, it remains cheaper than many locations around Europe with the average home priced at just over $100k.

A trawl through our portfolio demonstrates there are luxury homes in desirable locations on the market for some eye-watering prices, no matter where you’re from in the world. However, equally, there are also some smart, comfortable villas and apartments being offered for prices likely to inspire a double-take or two – some even in their own grounds and complete with a pool.

Combine that with Turkey’s climate, scenery, rich heritage, relatively modern infrastructure and relaxed and hospitable way of life and it remains as much of an exciting prospect as it ever was.

There is a saying in Turkish which translates as: “What flares up fast, extinguishes soon.” With such a rich and varied history encompassing quite a few empires it’s certainly a region which has endured. Perhaps this too is just another chapter and, in time, the tranquillity will return to the Turquoise Coast.

How can we help?

If you’re considering Turkey for your retirement or a fresh start and would like more information on buying property, why not drop us a line of give us a call? We can also help with the administration and logistics or relocation.

Alternatively, feel free to browse our blog for previous posts you may find useful. If you’d like to check out our full portfolio, you can find details of properties currently on our books right here. You can also keep up to date with our Facebook page here.