Why Are Rental Prices Rising?

Have you noticed your rent going up recently? You're not alone. Across Turkey, rental prices have been steadily increasing, with July 2023 marking another significant jump. But what's driving these changes? Is it inflation, demand, or other economic factors? And how do these increases impact both tenants struggling to keep up and landlords managing their properties? This article delves into the latest rental price trends, examining their causes, regional variations, and strategies for navigating this challenging market.

July 2023 Rent Increase Rates: The Numbers

The latest data reveals that rental prices in Turkey increased by an average of 121.6% year-over-year in July 2023. This staggering rise follows a pattern of sharp increases seen throughout 2022 and early 2023. For example, in Istanbul, rents rose by approximately 125%, while Ankara and Izmir saw increases of 118% and 120%, respectively. These numbers reflect not only inflation but also high demand in urban centres where housing supply struggles to keep pace.

Consider a practical scenario: A tenant paying 3,000 TL per month in July 2022 would now face a rent of around 6,648 TL for the same property. For many, this means reallocating a larger portion of their income toward housing or seeking more affordable alternatives.

Key Factors Driving Rent Increases

1. Inflation and Currency Fluctuations

Turkey's high inflation rate, which exceeded 85% in late 2022, remains a primary driver of rent hikes. Landlords adjust prices to keep up with rising costs of property maintenance, taxes, and mortgages. Additionally, the depreciation of the Turkish Lira has made real estate a preferred hedge against inflation, pushing demand—and prices—higher.

2. Urban Migration and Housing Shortages

Major cities like Istanbul continue to attract domestic and international migrants, intensifying competition for housing. With limited new construction in central areas, available units are quickly snapped up, allowing landlords to command higher rents.

3. Legislative Changes

Recent adjustments to Turkey's rental laws, including caps on annual increases tied to inflation, have had mixed effects. While intended to protect tenants, some landlords circumvent these rules by terminating leases early to reset prices at market rates.

Regional Breakdown: Where Are Rents Rising Fastest?

Not all regions are experiencing rent hikes equally. Istanbul leads with the highest increases, particularly in districts like Kadıköy and Beşiktaş, where demand from young professionals and expats is concentrated. In contrast, smaller cities like Bursa and Adana have seen more moderate rises, though still above 100% year-over-year.

For instance, a two-bedroom apartment in Istanbul’s Beyoğlu district that cost 4,500 TL in 2022 now averages 10,000 TL—a 122% increase. Meanwhile, similar properties in Ankara’s Çankaya district rose from 3,200 TL to 7,100 TL (121%).

How Tenants Can Adapt to Rising Rents

Facing steep rent increases, tenants have several options:

• Negotiate with Landlords: Some landlords prefer reliable tenants over frequent turnover. Offering to sign a longer lease in exchange for a smaller increase can be a win-win.
• Relocate to Suburbs: Areas farther from city centers often offer lower rents, though commuting costs and time must be factored in.
• Explore Shared Housing: Splitting rent with roommates can ease financial pressure, especially for students and young professionals.

Case in point: A group of three students in Izmir reduced individual rent burdens from 2,500 TL to 1,200 TL by sharing a larger apartment.

Landlord Strategies in a Volatile Market

Landlords, too, face challenges. While higher rents boost income, vacancies and tenant turnover can offset gains. To maintain stability:

• Balance Increases with Tenant Retention: Sudden large hikes may drive tenants away, leading to costly vacancies.
• Invest in Property Upgrades: Modernising units can justify higher rents and attract long-term tenants.
• Stay Informed on Regulations: Understanding legal limits on rent increases prevents disputes and fines.

One landlord in Ankara reported retaining tenants for five years by limiting annual increases to 50%—below the market average—while ensuring timely maintenance.

What’s Next for Turkey’s Rental Market?

Experts predict that rental prices will continue to climb in 2024, although possibly at a slower pace if inflation stabilises. However, with housing shortages persisting and unchecked urban demand, affordability will remain a critical issue. Policymakers may need to intervene with subsidies or incentives for affordable housing development to ease the crisis.

For now, both tenants and landlords must stay agile, leveraging negotiation, research, and creative solutions to navigate this turbulent market.