A new report analyzes the causes, consequences of house inflation and the potential impacts of the ongoing efforts to resolve the recent surge in house prices. The report analyzes supply and demand side dynamics in the Turkish housing market and further deals with international dynamics leading to soaring house prices.
House inflation has been a recent critical challenge in the Turkish economy. Commodity price increases, supply-demand imbalance, especially the decreased housing production during the pandemic period and the rapidly increasing housing demand after the pandemic have all led prices to be more volatile all over the world. Limitations on housing loans and rent increases have brought temporary relief in Turkey. However, policymakers also focus on solutions that will spread to the new period and longer term, such as support for housing production and the new social housing projects. In this direction, Turkey’s first solution to the ongoing global housing crisis is the comprehensive and long-term social housing project called the ‘First Home, First Workplace’ project. This first step is an ambitious project that has emerged with the aim of making especially those who are most affected by the housing price increases homeowners. The project aims to offer housing, land or workplaces to citizens who have no houses, with relatively long terms such as 20 years and in appropriate installments, and is introduced as the largest social housing project in the history of the modern Turkish Republic.
The main problem in the housing sector is the disruption in the supply and demand balance. More specifically, it is the internal and external factors that cause the demand to swell and the supply to weaken. The main role that public interventions can play at this point (without disrupting the functioning of the market mechanism) is to focus on supporting the production of supply, such as social housing, and to offer subsidies to the production processes. New projects such as land subsidies are also valuable in this respect. Demand-oriented policies of the past, including cheap loans, loan abundance and extension of maturities in previous periods, to stimulate demand; are step by step directed towards the production incentives such as reducing costs, land and infrastructure supports, which will increase production and supply. With the new projects to be developed in this direction, it is aimed to stablize housing prices and rents; and to restore price stability.
On the other hand, the current main problem of the housing market in Turkey is primarily lack of supply. The sector, which has experienced a serious contraction since at least 2017, but especially since the pandemic period of 2020, could not keep up with the booming demand after the pandemic. In 2022, the contraction in construction reaches 11 percent. The “First Home, First Workplace” project is an important social policy, especially for low-income groups, as a part of the social state understanding. It can make serious contributions to the provision of social justice. It can also make access to housing much easier. The low prices and long-term payment options offered will provide a serious advantage for those with weak purchasing power. Access to housing is expanded with appropriate installment payments for social housing and housing land, at a certain percentage of the minimum wage in the 2023 projection and in line with the savings rates. In almost every city, the opportunity to become homeowners is offered to the segments most affected by the housing price increases with monthly installments that are lower than the rent amounts. This study aims to analyze how the recent social housing policies actively used in Turkey and the new large and comprehensive social housing project ‘First Home, First Work Place’, announced on September 13, 2022, can help resolve the housing problem, with a broad analysis of the Turkish housing market.
Issued in October, 2022