Istanbul’s housing prices decline amid oversupply
Gülistan Alagöz - ISTANBULProperty prices have dropped up to 20 percent in several parts of Istanbul due to a glut in the housing sector after large-scale urban transformation projects created an oversupply in the market.
The supply and demand equilibrium in the sector has faded away, according to sector representatives.
The decreasing trend in housing prices is especially prominent in terms of high-end units and in neighborhoods undergoing intense urban transformation activities.
According to experts, there are two main reasons behind the trend. First, many people needed to rent out new homes as their own properties were being rebuilt as part of urban transformation projects. Prices rose immediately as the sector saw a skyrocketing trend in demand for housing. After most of these people began to return to their rebuilt houses, they ended their rent contracts one by one, which resulted in an oversupply in houses for rent. Second, developers for a number of properties sought very high prices for their apartments or houses, but these prices have started to decrease in accordance with the sector’s realities.
Ömer Faruk Çelik, the head of Turkey’s Housing Developers and Investors Organization (KONUTDER), said the supply and demand equilibrium had been destabilized.
“We have seen an overproduction in some hot spots on the Asian side, such as Bağdat Avenue, which hosts high-end properties, and Fikirtepe, which underwent intense urban transformation projects, without taking the supply-demand curve into account. Urban transformation projects intensified in higher-income neighborhoods. This has now led to an oversupply in these areas. Housing developers who cannot sell them have now started to slash prices… The main problem is with the nature of the model here,” he said.
He said the same trend would follow in Ankara and the Aegean province of İzmir.
“Turkey’s annual housing need is 600,000 on average. However, we now have an additional 200,000 to 300,000 units of supply because of urban transformation projects,” he said.
Dramatic price cuts on Asian side
A sector representative said the price cuts were quite common on the Asian side of Istanbul, even causing some contractors to slash prices up to 35 percent.
“The prices are now plunging in places that underwent major development in recent years. Many small- and medium-sized housing developers joined the trend and rebuilt houses under the umbrella of urban transformation projects. More than 2,000 permits were taken in Kadıköy in the last two years alone. This means that more than 10,000 new units were built there in a very short time. We have, however, seen a visible plummet in demand due to economic uncertainties, security concerns and the general low morale among people,” said Melih Tavukçuoğlu, the head of the Anatolian Side Construction Contractors’ Association (AYİDER).
A luxurious property on Bağdat Avenue, which could have been sold for at least $2 million last year, is not luring buyers even for less than $1.5 million, a real estate commissioner said.
EVA Real Estate Evaluation CEO Cansel Turgut Yazıcı highlighted the correlation between acquisition decisions and people’s general mood.
“We have seen an 18 percent decrease in average housing prices. The prices really skyrocketed in some districts... Units with a price tag of more than 1 million Turkish Liras are especially problematic, but we do not see any problem in affordable properties,” Yazıcı said.
Another sector representative said prices had ballooned at such unmatched levels that they had to fall to produce a balance.
“The economic problems have disciplined people,” said a real estate broker, Mehmet Tatar.