Explore how US sanctions on Russia and Iran have shaped the real estate landscape in Turkey, particularly in Istanbul, with insights from Altay Atasay. Understand the shifts in foreign investment and the broader implications for the local housing market under the Turkish flag.
The Shift in Foreign Real Estate Investments
In recent years, there has been a noticeable increase in residential property purchases by foreigners in Turkey, especially in metropolitan areas like Istanbul, Antalya, and Ankara. Neighborhoods such as Beylikdüzü, Kadıköy, Bağcılar, and Sarıyer in Istanbul have seen significant concentrations of Russian buyers, while Iranian buyers have shown preferences for Esenyurt, Kağıthane, Sarıyer, Kartal, and Maltepe.
Market Share Growth and Price Dynamics
The share of the market accounted for by foreign buyers in Istanbul’s residential real estate has almost tripled over the past five years, from 3.43% in 2017 to 9.61% in 2022. However, these purchases still represent a small fraction of the Turkish residential market. Despite the presence of luxury and leisure indications from wealthy Russians and Iranians, most foreign purchases are moving towards middle-class participation, contrasting with middle-class Turkish buyers who follow significantly different pathways in the Istanbul housing market.
Financing and Commission Differences
Turkish mortgage markets continue to evolve with low approval rates; Turkish buyers typically finance about 80% of the property value at around 20% interest rates. Last year, only about half of the properties purchased in Turkey were financed through mortgages. Turkish lenders do not offer mortgages to foreigners, meaning that foreign investors need to make cash purchases, potentially at more attractive commission rates than those offered to Turkish buyers.
Impact on Living Standards and Government Response
The increase in housing costs has required both homeowners and renters to cut other expenses, contributing to perceptions of declining living standards. The Turkish government has responded by raising minimum wages and government salaries, but these measures do not address the housing shortage. Policies targeting poor refugees, mostly Syrians, include limiting their work visas and encouraging migration to Europe.
Broader Implications of Sanctions
Most research on sanctions focuses on the senders and their targets, but the impact on third countries like Turkey is often overlooked. The capital flight from middle-class and wealthy Russians and Iranians has introduced new dynamics into the Turkish housing market, which is crucial for understanding the effectiveness of financial sanctions. Countries like Turkey might adapt their policies to accommodate this capital flight, potentially undermining the goals of the governments imposing the sanctions.
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