Istanbul’s skyrocketing rents now equal 16 years of mortgage payments
The Suleymaniye Mosque is seen illuminated in the background as people walk in the foreground, their figures reflecting on the rain-soaked surface along the Golden Horn after a rainfall in Istanbul, Türkiye on November 23, 2024. (AA Photo)
The imbalance in the housing market continues as the trend shifts dramatically. While property prices once surged rapidly, the trend has now reversed, with rent increases outpacing housing prices.
According to the Central Bank of the Republic of Türkiye’s (CBRT) Housing Price Index for September 2024, property prices increased by 1% on a monthly basis. During the same period, the Turkish Statistical Institute (TurkStat) reported a 7.62% rise in rental prices.
On an annual basis, housing prices increased by 27.4%, though they effectively declined by 14.7% in real terms. However, rents soared with an annual increase of 117.43%. CBRT data shows that in October 2022, the annual growth rate of the Housing Price Index stood at 186.7%, while the annual rent increase was 41%. The peak in annual rent hikes occurred in May 2024, reaching 125.14%.
Renting vs Owning: Gap shrinks to 2008 levels
The recent narrowing of the gap between property prices and rent can be attributed to several factors, including the now-lifted 25% rent increase cap and the higher cost of accessing home loans due to interest rates. According to data compiled by Istanbul Real Estate Appraisal, the rental multiplier – indicating how many months of rent it would take to buy a home – fell to 199.5 months in the third quarter of 2024.
A graph shared by Real Estate Appraisal Expert Ahmet Buyukduman on social media platform X shows that the rental multiplier has decreased to 16.7 years, reverting to 2008 levels. The graph indicates that during the period of the 25% rent increase cap, the rental multiplier exceeded 320 months. Two years ago, it would have taken around 26-27 years of rent to buy a home, but this has now dropped to below 17 years.
Housing prices spike over 3 years
According to data from Türkiye’s Dunya Newspaper housing unit prices have surged over the past three years.
Average price trends:
- By the third quarter of 2024, the national average price per square meter in Türkiye reached ₺33,900 ($985).
Regional prices:
- Istanbul: ₺52,000
- Izmir: ₺38,200
- Ankara: ₺27,900
Comparison with the third quarter of 2021:
- National average: ₺5,900
- Istanbul: ₺9,900
- Izmir: ₺6,400
- Ankara: ₺4,200
Over the past three years, prices have increased by 471% nationwide, 425% in Istanbul, 491% in Izmir, and 555% in Ankara.
Rent market overview: Price surge across cities
The latest figures from BETAM and sahibindenx on the rental market outlook for September 2024 show that the average rental listing price per square meter nationwide in August was ₺185.9. Annual rent increases were measured at 46.7% in Istanbul, 56% in Ankara and 62.5% in Izmir.
Average rental listing prices per square meter were:
- Istanbul: ₺244.4 in Istanbul,
- Ankara: ₺180 and
- Izmir: ₺218.8
Based on data from the Central Bank and BETAM, the housing-rent multiplier was calculated as 212 months (17.7 years) for Istanbul and 182 months (15 years) nationwide.
The housing market in Türkiye, particularly in Istanbul, is experiencing significant challenges as rent prices soar while property price growth remains subdued. With annual rent increases reaching 117% compared to a mere 27.4% rise in property prices, the rental multiplier has reverted to levels not seen since 2008.
The situation highlights the growing disparity between renting and home ownership, driven by the removal of the rent increase cap and higher interest rates. As a result, it now takes significantly fewer years of rent payments to equal the cost of purchasing a home, further complicating the landscape for renters and potential homeowners alike.
