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Depreciation in Turkish Liras in 2021 and the Increase in Foreign Real Estate Demand

Posted on 4 November 2021
Updated On: 4 November 2021

The real estate sector, which is growing more every day, is one of the most significant sectors of the Turkish economy. The industry, which is growing amid the epidemic and Turkish currency devaluation, more and more attracts global investors. The strong increases in Turkey’s real estate market have not occurred in vain or unexpectedly, as numerous data shows a progressive rise in the number of foreign investors in Turkey’s real estate over the last few years. Nevertheless, the Turkish economic sector is caught between obtaining an annual growth – which reduces the value of the lira’s currency value degradation – and maintaining the lira’s macroeconomic stability – which ultimately results in a higher economic recession. On the positive side, the Turkish lira’s fall renders Turkish businesses more appealing, which may justify the definite trend of international investment. Turkey has been enacting business-friendly legislation in order to stimulate business startups and development. According to the World Bank’s global competitiveness index, Turkey jumped from 43rd in 2019 to 33rd in 2020. On September 23, 2021, the Central Bank of Turkey took a step that highly affected economics: the rate of interest were reduced from 19% to 18%.

Interest rates influence real estate assets in a variety of ways. Interest rates determine the cost of borrowing investment, which impacts people every time purchasers decide to buy a home. Whenever interest rates rise, mortgage debt becomes more pricey. Investors, on the other hand, spend less as interest rates fall. Interest rates can have a considerable impact on the cost of funding and mortgage rates, which in turn influences real estate costs and, as a result, prices. Also, interest rates have an influence on the structure of funds and the demand for investments in addition to the price of investors’ new properties. Such capital flows have an impact on the availability and demand for real estate, which in turn has an impact on real estate values. 

Additionally, the foreign buyer owns foreign currency, so each depreciation of the Turkish lira is a supplemental benefit for investors, particularly if the investor acts quickly before real estate prices are modified based on the most recent currency rate. It is important to remember that the prices of construction supplies and fuel required by heavy equipment directly depend on its cost, so there is no wonder that each initiative construction investment project will burst. One of the most important causes motivating international investors and companies to participate in real estate investments and acquire a property in Turkey is the depreciation of the Turkish lira’s worth. Falling prices on a dollar basis may have raised the appetite of foreigners to purchase a property in Turkey.

The primary reasons foreign citizens are interested in purchasing estate in Turkey following the depreciation of the Turkish lira are the wide range of premium and affordable, new construction, off-plan, renovated apartments and villas, and resale options. There are numerous options available, ranging from luxurious mansions with sea views to simple and low-cost apartments, due to the fall of the domestic currency. Furthermore, real estate marketing professionals in Turkey have stated that many of the property sales have been in high demand. 

The Turkish housing market will always be a safe way of investing. The rise in the currency rate, as well as the chances for foreign investors in the sector to invest in Turkish real estate, are attractive. Therefore, the depreciation of the Turkish lira indicates that the overall estate market is particularly appealing to overseas purchasers. As a consequence, people from the UAE, Iran, Iraq, Russia, Ukraine, and Europe are migrating to Turkey. The majority of foreign homeowners purchase property in Istanbul, which accounts for 46 percent of the overall annual real estate sales, second by Antalya, which counts for 20 percent of total yearly revenue. 

Although the procedure of purchasing a house in Turkey is fast and easy, real estate is an excellent option choice for people from other countries. Tourists who are enamored by Turkey’s magnificence, culture, and market mechanisms contribute to a large segment of real estate purchases. Turkey is one the most desirable locations for global real estate investors, and its reputation grows with each passing year.

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