Where in Europe have property prices increased the most since 2015?

Istanbul
Istanbul Copyright Canva
By Doloresz Katanich
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Hungarian house prices have climbed by more than 166% since 2015, but there's a country with an even more eyewatering increase.

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The price of an apartment in Istanbul is now in close competition with those in infamously expensive cities such as Paris and London, as figures show that Turkish house prices are 12 times higher than they were nine years ago in nominal terms. 

Among OECD member states, northern European countries such as Sweden and Finland have seen the smallest change, with more than 4% increases in nominal housing prices since 2015. 

On the other end of the scale sits transcontinental Turkey, followed by Hungary, where prices are 166% more than they were in 2015. 

The majority of OECD countries saw their house prices rise well into the double digits between 2015 and 2023. Still, Turkish prices particularly stand out from the crowd, pushing the rental prices so high that even the country's central bank governor can't afford to rent.

However, while Turkish housing prices have risen gradually since 2015, they only started climbing at a brake neck speed in 2021.

They reached their peak in 2022, when house prices went 168% up in a year, followed by a rise of 76% in 2023. 

Meanwhile, across Europe and the US, house prices took a hit in late 2022 as central banks in these economies started hiking up interest rates to tackle high inflation, which pushed up mortgage rates in the process.

On the flip side, the Turkish central bank lowered its benchmark rate in August 2022, even though in November of that year inflation in the country was close to 85%.

Experts put the soaring escalation of nominal property prices in Turkey down to a mix of reasons. 

"The actual change starts from 2020," said Görkem Yapan, real estate and construction sector leader for the Turkish market at KPMG. "The main reasons I believe, are the currency fluctuation, the devaluation of Turkish lira, higher inflation rates and the consequent increase in construction costs, and also the growing demand after the pandemic."

Turkey's inflation rate in 2022 was extremely high, more than 50% for almost the entire year, reaching above 80% in October. However, real-term house prices (adjusted for inflation) also climbed by 96.7% by the third quarter of 2023 compared to 2015, according to the OECD.

"We experienced last year earthquakes, affecting 11 cities in Turkey, that also boosted the prices, because people want to live in more secure places like earthquake-resistant buildings," said Yapan.

You think you have a high mortgage? Think again...

While cash buyers flooded the market, people with mortgages in Turkey have seen their monthly rates skyrocket: the extreme levels of inflation in Turkey, which recently reached almost 70%, triggered the central bank to aggressively tighten its monetary policy and raise the benchmark rate from 8.5% in June 2023 to 45% in January 2024. 

As a result, mortgages in Turkey now have an annual 40% interest rate. Also, the maximum mortgage up for grabs covers no more than one-fifth of the price of a house.

Throughout 2023, less than 15% of houses sold had a buyer with a mortgage. The rest were sold to cash buyers.

Are Russians buying up the Turkish property market?

Starting in 2022, the most significant portion of houses sold to foreigners went to Russians, followed by Iranians. 

"Following the onset of the Russia-Ukraine conflict in February 2022, there was a significant influx of migrants from both nations to Antalya, İstanbul and Mersin," said Yapan, adding that these three locations became the most popular among Russian investors where their presence pushed prices up.

In Antalya alone, prices jumped 230% in one year by the second half of 2022.

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"Due to the doubling of the foreign population in Antalya over the course of two years following the migration from Russia and Ukraine, property and rental prices skyrocketed," said Yapan. 

Meanwhile, the devaluation of the Turkish lira limited Turkish buyers' opportunities. At the same time, a large number of Russian and Ukrainian citizens paid huge amounts in cash, triggering property demand that further provoked the increase in prices.

However, demand from Russian buyers didn't explain the major change in prices in the entire country, even if their significant interest in certain locations did drive prices up. 

"However, in 2023, out of 1.2 million houses sold in Turkey, 35,000 houses (3%) were sold to foreigners, and roughly 30% of these houses sold to foreigners were sold to Russians," said Yapan, adding that Russian investors recently started swapping Turkey for other destinations, such as Cyprus. 

Investing in the Turkish property market - is it too late?

The Turkish market has slammed on the brakes as a result of high housing and rental prices, high interest rates and declining household income in real terms due to high inflation.

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House prices are still increasing in nominal terms, but they are falling behind inflation. Therefore in real terms, they've been getting cheaper lately. 

High construction costs may lead to limited supply. However, if demand for homes increases and interest rates drop to stimulate growth, it could help overcome the current stagnation.

However, people cannot afford to buy their house at the moment, leading to stubbornly high rental prices - and this is actually leaving some room to invest for cash buyers.  

"There is a ratio, for instance, in Istanbul or in Turkey," explained Yapan. "Most of the time the sale price of a house was 300 times the rent. It's an average. But now the rents are very high." 

"The rent increase is more than the house price increase," he said. "So now this average drops between 250-300." 

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In theory, this means that, in fewer than 300 months, investors can recoup the price of a house. 

Disclaimer: This information does not constitute financial advice, always do your own research on top to ensure it's right for your specific circumstances. Also remember, we are a journalistic website and aim to provide the best guides, tips and advice from experts. If you rely on the information on this page, then you do so entirely at your own risk.

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