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Amid soaring housing costs, İstanbul is packed with vacant, newly-built homes
Three years ago, Kimberley and Mert moved into a small apartment with a garden in İstanbul's Nisbetiye district, a middle-to-upper-class residential neighborhood.
Despite Kimberley's relatively well-paid job of about 30,000 liras per month and Mert's part-time job adding an extra 8,000 liras, the young couple grew increasingly concerned about their finances.
They had been drawn into a legal battle with their landlord over the annual rent hike – a routine procedure meant to keep rental prices up to date with Turkey’s high inflation rates.
"This year, the landlord tried to raise the rent by eighty percent," Kimberley told Turkey recap, using an alias for herself and her partner due to the ongoing court case.
She said she felt intimidated by her landlord, who lives across the street and accuses Mert of illegally 'Airbnb-ing' part of the house to her for an exorbitant price, which the couple denies.
Instead of the landlord’s desired hike, Kimberley and Mert paid a 25 percent rent increase in compliance with the legal limit. This upped their monthly rent to about 8,000 liras – currently a bargain as average new rents grew by 105.13 percent over the last year in İstanbul to over 18,000 liras. For reference, the national minimum wage 11,402 liras.
"I think the rent of this apartment is now worth around 30,000 liras," Kimberley said. "If we have to pay 30,000 liras, we will not have enough money to survive. It means moving to the outskirts of the city."
Based on available housing data, Turkey recap calculated between 6.9 to 11.5 percent of İstanbul homes are vacant, surpassing the 'healthy' vacancy rate of 3 to 5 percent, as defined by the European Homelessness organization FEANTSA.
İstanbul has an estimated 6.5 million total residences. According to an analysis of water and gas consumption by the İstanbul Planning Institute (İPA), which is linked to the opposition-run municipality, between 450,000 and 750,000 units in İstanbul remain unoccupied.
While the figures are staggering, experts who spoke with Turkey recap expressed concerns about the accuracy of the İPA’s empty housing data, and the institute's representatives also acknowledged more research was needed on the topic.
Still, a large number of dwellings sit vacant in İstanbul despite surging housing prices. Many are marketed to upper and middle class buyers and are predominantly located in İstanbul’s outer districts.
The high vacancy rate is caused by many factors, though primary drivers include Turkey’s unstable economy, hesitation among homeowners, faulty construction, unaffordable prices and a rise in property investments by foreigners for the sole purpose of obtaining Turkish citizenship.
Safe investment bets
In past decades, real estate investments in İstanbul had been a popular bet for many Turkish families. The city’s property prices grew steadly over the years, largely driven by steady demand, low cost loans, population growth and immigration.
The trend now continues as more homebuyers seek out earthquake-resistant buildings amid an aging housing stock, in which about 70 percent of İstanbul's homes pre-date stricter building codes implemented after the 1999 İzmit earthquake.
Additionally, Pres. Recep Tayyip Erdoğan's unorthodox economic policies – which oversaw sharp interest rate cuts until a new economy team was appointed in June – prompted people with access to credit to safeguard their assets by entering the real estate market.
Those who bought at the right time saw substantial investment returns over the past five years as house prices nationwide went up by a staggering 966.7 percent and rental prices by 814.4 percent in Turkish liras, while the cumulative inflation rate hovered around 390.03 percent based on likely underestimated official numbers.
In İstanbul alone, housing prices increased 127.3 percent in the first quarter of 2023 compared to the same period in 2022, one of the sharpest surges in the world.
Such dynamics made real estate investments the preferred choice over other forms of investment, Esim Köymen, the head of İstanbul's branch of the Chamber of Architects, told Turkey recap.
"Instead of buying foreign currency or [investing] or starting a business with their financial means, [people] purchase real estate with it," Köymen said.
But times have changed and property owners can no longer sell homes at just about any price, Görkem Öğüt, the manager of real estate portal Endeksa, recently told Habertürk.
The average home price in İstanbul rose from 3.56 million liras to 3.96 million liras in May, but housing sales dipped the same month and slid further in June, falling 44 percent when compared to June 2022. For context, the average home sale price in Turkey was 2.54 million liras in June.
The June dip fueled speculation that İstanbul home prices had hit a ceiling, at least in the short-term.
Özge Tekçe, a researcher at İPA, said one reason for the high number of unoccupied residences is that some people purchase second or third homes, which they purposefully leave empty for a variety of reasons, including investment purposes and economic instability.
Leaving homes vacant might appear sensible for some homeowners but can also harm the overall market, Osman Balaban Urban Planning Professor at Ankara's Middle-Eastern Technical University (METU) told Turkey recap.
"Speculative pricing may threaten affordable homes for households in need," Balaban said.
At the same time, stricter regulations protecting tenants have made homeowners and real estate agents more hesitant to rent out property, as legal disputes like the one involving Kimberley and Mert can be drawn out for two-three years before reaching a decision.
"I mean, it's basically unfair if you own a house and the prices are going up like crazy, and you cannot increase your rental [rates]," Hakan Gümüş, chairperson of Bosporus Invest told Turkey recap, emphasizing he was not in favor of what he called "populist measures" to meddle with the market, and that the Turkish government "is not a communist regime".
Taxing empty houses
In response to current dynamics, the government has begun hinting it may introduce a vacant property tax to encourage homeowners to put their houses on the market rather than keeping them unoccupied in hopes of gaining value.
"Empty houses also affect rental prices,” Erdoğan said in July 2023, in response to a journalist’s question. “Some countries impose high taxes on vacant houses. Is such a thing possible in Turkey?"
He added the government was studying the issue and would also impose penalties, if needed, to stop exorbitant rent increase and housing prices.
İstanbul Dep. Sec. Buğra Gökçe and İstanbul Mayor Ekrem İmamoğlu of the main opposition CHP also support the idea of taxing empty houses, which they see as a revenue source to fund the construction of low-income housing.
"Taxation on vacant properties is crucial for preventing speculative investment and pricing," Balaban said. "However, legal arrangements should also be made to prevent misuse of properties by tenants."
Still, Hakan Akdoğan, the head of All Entrepreneur Real Estate Consultants Association (TÜGEM), told Hürriyet that such taxes could lead to fraudulent contracts related to vacant properties.
Sheltering issues in İstanbul also partly stem from a mismatch between available housing, primarily consisting of high-end properties, and the needs of the population, which requires a mix of high, middle and low-income housing. The result is many newly-built homes are unaffordable for lower and middle-income groups.
"There is no accessible housing distribution for everyone. This is actually the main problem in İstanbul," Tekçe said.
Under the AKP's rule, an estimated 12.5 million new residences were constructed nationwide between 2002 and 2022. Yet many of these properties were primarily developed as prestige investment assets while the government crafted policies that positioned the construction industry as the nation’s economic engine.
"This was a political choice of the Erdoğan government in the mid-2000s," Balaban said, noting the sector spreads wealth to various industries, including steel, cement, and wood as well as providing "jobs to the masses" while remaining fairly open to corruption.
As a result of the construction sector’s deep links to the overall economy, some began to fear the Turkish economy would halt if construction stopped, Balaban said.
So, when the economic model began to push its natural limits in 2017-2018, the government started to use policies to force the sector’s growth, exacerbating both the housing prices as well as the surplus of vacant housing.
"The first thing they did was to facilitate the sale of housing to foreigners," Balaban said.
This was encouraged by reducing the minimum investment threshold required to receive Turkish citizenship from 1 million dollars to 250,000 dollars in September 2018.
As a result, home sales to foreigners more than tripled from 20,000 in 2017 to 67,490 in 2022, with 24,000 home purchases by foreigners in İstanbul alone during the same period, according to official statistics.
In 2019 and 2020, 7,500 foreigners acquired Turkish citizenship through real estate purchases, while in the first six months of 2021, this number surged to 10,000.
The top foreign home buyers were people from Iran, along with buyers from Afghanistan, Iraq, Yemen, China, Palestine, Jordan, Lebanon, Egypt and Pakistan.
"Their aim is not the satisfaction of a housing need, but their aim is to get Turkish citizenship," Balaban said.
This policy of obtaining citizenship through property investment has come under increasing criticism in recent years. Amid rising prices and anti-foreigner sentiments, the government responded in June 2022 by raising the minimum investment threshold for citizenship to 400,000 dollars.
Still, the effects of recent economic and real estate policies continue to effect housing markets throughout Turkey, as rents surge in all major cities.
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