In the bustling metropolis of Istanbul, even the most influential figures aren't immune to the crushing weight of skyrocketing rent prices. Hafize Gaye Erkan, the force behind Turkey's central bank, has been compelled to return to the nest she left behind—her parents' home. In an interview with "Hürriyet," Erkan, age 44, candidly admitted, "We've failed to locate any reasonably priced dwellings in Istanbul. The prices are exorbitant. We ended up staying with my parents." Pondering over the situation, she went on to ask, "Could it be that Istanbul has gone above and beyond Manhattan in terms of expenses?"
Prior to her esteemed position as the head of Turkey's central bank, Erkan spent two decades honing her skills in management positions at global banking giants like Goldman Sachs in the United States.
Turkey has been grappling with rampant inflation for some time now, with the November inflation rate reaching 62% compared to the same period the previous year. Concerning the rental market, Istanbul witnessed a staggering 77.1% increase in rent prices within the same timeframe, according to a study conducted by Bahçesehir University, located in the city. In an attempt to mitigate the situation, the Turkish administration imposed a cap on rent hikes, limiting them to 25%.
However, experts in the field argue that this measure has further exacerbated the rental market predicament. In their quest to shed tenants and cash in on the sky-high rental prices, landlords become increasingly aggressive, employing questionable tactics at times.
Erkan acknowledged that the Turkish central bank, under her command, had implemented interest rate increases by 8.5 percentage points, pushing it to 40%. She also revealed that these "monetary tightening measures" were gradually drawing to a close.
In the face of escalating rental prices, Erkan experiences inflation's bite personally within Istanbul, prompting her decision to return to her parents' home. The Turkish lira struggles to maintain balance against inflated costs, with rent prices skyrocketing in Istanbul by an alarming 77.1% within a year, as per Bahçesehir University's study.
Enrichment Data:
The financial landscape of Istanbul's rental market is molded by various factors, prime among them copious rent inflation and dynamic market circumstances. Here's the lowdown:
- Yields and Prices:
- Istanbul's typical average gross rental yield stands at 7.30% as of Q1 2025.
- For instance, the average cost for a 1-bedroom property in Kadıköy is $171,886, with a monthly rent of $990, resulting in a 6.91% annual yield.
- In contrast, Beylikdüzü boasts an appealing 1-bedroom property at $54,348, with a monthly rent of $530, yielding a striking 11.70% annually.
- Rent Inflation:
- The runaway rent inflation in Istanbul can be attributed to surging housing demand and dwindling apartment supply, with notable consideration given to desirable areas.
- This influx has shifted the focus from renting to homeownership, as individuals bid adieu to escalating rents and inflation.
- Countermeasures:
- Mortgage Interest Rate Cuts: Advocates in the real estate sector swerve optimistically around the industry's performance, citing support from policy measures to navigate challenges. They recommend slashing mortgage interest rates to approximately 1% to bolster demand and alleviate high rents.
- Urban Transformation Projects: These initiatives contribute to sprinting housing demand, driven by pre-sold developments and urban transformation initiatives.
- Government Incentives: Although specific measures targeting high rent inflation are absent in sources, the overall economic climate and government-sponsored incentives for real estate investment may aid in quelling market turbulence.
