Located at the crossroads of Europe and Asia, Istanbul is an incredibly dynamic city and has been a prime location for property investments for quite some time. Nevertheless, the phenomenon of rapid increase in the geography of real estate in the city begs the question ‘What are the reasons behind it?’ In this article, however, the focus will be on the fundamental issues that cause the housing market in Istanbul to be very expensive.
1. High Internal Demand
Urbanization and Population Growth:
The extended urbanization growth and demographics shifts in Istanbul have increased the levels of housing demand. With the ongoing influx of people within the city in search of employment or studies, residential properties are in higher demand than the available supply.
Middle-Class Expansion:
There is a new middle class, which is supported by rising incomes, and it has increased the appetite for decent housing. This group is ready to spend on real estate offerings, especially in strategically located areas.
2. External Capital
Geopolitical Factor:
Foreign investors have found a stronghold in this city due to Istanbul’s location which sits between both Europe and Asia, serving as a bridge between the two continents. The ethnic composition, cultural richness, historical sites, and the developed economy of the city bring in many investors’ interest around the globe.
Golden Visa Programs:
The Turkish Citizenship by Investment program which is a government policy has encouraged foreign investors to venture into the Turkish real estate market thus enhancing the demand even more.
3. Limited Availability of New Lands
Physical Barriers:
The available land for new acquisitions and developments in Istanbul is also constrained by the geography of the city, which consists of several hills as well as the expansive body of water within the city. This limited supply enhances land values which consequently decorates the pricing of construction works and final properties as well.
Urbanization and Facilities:
The town's expansion has sprawled beyond its de jure limits to create de facto zones, with an accompanying set of tensions due to lack of proper infrastructural development. Therefore, assets are also expected to appreciate over time considering that the authorities will have to invest on the expansion of the facilities to host the increased population which is also not a cheap undertaking.
4. Expenses Associated with Constructions
Escalation in Prices of Materials:
The construction materials which include steel, cement, timber, among others have been on the rise which eventually increases the cost of the construction of the given property.
Labor Problems:
In the case where there is a shortage of the required workforce within the construction industry, such skilled labor becomes expensive and therefore has an effect of raising the overall costs incurred regarding building projects.
5. Government Constraints within the Market
Tax benefits or concessions and Payment aids:
Most countries for instance have tax concessions and subsidies as part of the laws governing real estate. Although these prop up the economy it often leads to inflation of demand and prices.
City Land Use Policies and Limitations in Development:
Excessive city land use policies and limitations in development tend to curtail the supply of new units in the market hence escalation in prices.
6. Hypothesis and Market Sentiments.
Confidence Among Investors:
Emphasizing positive investor confidence and hope in the market can lead to an increase in property prices as buyers believe that there will be great appreciation in the future.
Speculative Purchase:
The purchase of real estate properties with a view to reselling them at a profit by investors, is another factor that can lead to a price increase.
7. Currency Fluctuation Effects on Global Business
The Fall of Turkish Lira – Depreciation of the local currency:
The Turkish Lira with respect to other major currencies, may help enhance foreign buyers' property investments in Istanbul. On the other hand, it could also raise the construction expenses for the local developers tending to the real estate, thus affecting the prices of properties.
Conclusion:
Considering the above, the expensive housing market in Istanbul is a matter that cannot be explained in simple terms as it has numerous influencing factors. Local demand, foreign investments, scarcity of land, increasing building costs, government intervention, speculation, and volatility in currency are some of the forces driving property prices upwards. Nevertheless, even though the market has its ups and downs, they can take their chances by looking for other places or accepting off-plan purchases, state-funded accommodation, and thinking about investment in the long run.
