HOUSE prices fell in March for the first time in six months, according to Halifax.
The lender said they slipped by one per cent compared to the previous month, and a typical home now costs £288,430.
Prices are still 0.3 per cent higher than a year ago, however.
The drop comes after mortgage rates started to creep back up again as banks and building societies adjusted to more cautious expectations of interest rate cuts.
At the start of the year, financial markets had been betting the Bank of England would cut rates as soon as May.
But that has now been pushed back to June — or even August — after the Bank kept the base rate at 5.25 per cent.
Kim Kinnaird, director of Halifax Mortgages, said: “Markets are less optimistic about base rate cuts.
“This has stalled the decline in mortgage rates that drove market activity earlier in the year.”
Jonathan Hopper, boss of Garrington Property Finders, said: “In some areas the number of homes coming on to the market is four times higher than the number of new buyers registering with estate agents — and this surge in supply is also holding back prices.”
While house prices have dipped they are still around 20 per cent higher than before the pandemic and mortgage rates almost double where they were in 2021.
WFH sideline
STAFF operating entirely from home are 11 per cent less likely to be be promoted than those working from the office, research indicates.
And those doing two or three days in the office are seven per cent less likely to step up the ladder, according to a survey of 1,000 managers by the University of Warsaw.
Body save bid
THE Body Shop may be saved in a restructuring plan that puts it back in private equity hands.
The beauty retailer collapsed four months after Aurelius bought it.
Now administrators have put forward a plan to creditors which would reduce rents but keep the remaining 115 stores open.
Good Week
Bad Week
EIGHT common features around the home could actually be knocking money off its value.
Halifax said house prices rose for a fifth consecutive month in February by 0.4% and 1.7% year-on-year.
The uptick might have you thinking of selling on your property and cashing in.
But you should be wary of a number of features that could actually make your home worth less, according to estate agent Yopa.
Ponds, artificial grass and unused or old swimming pools can knock up to 19.6% off the value of your home it turns out.
An unused or old swimming pool could slash your home’s worth by £55,799, based on the average UK property price of £284,691.
Got brown, unpainted Pebbledash on your external walls? That could be reducing the value by £28,469.
Meanwhile, poor parking options, or none at all, can slash your potential asking price by £19,359.
Artificial grass, having no lawn and no bath in the main bathroom can also see the average UK home value drop by £14,804, £6,100 and £5,694 respectively.
Having a north facing garden and pond can also see a home’s value fall by £5,525 and £5,258 respectively.
How to boost the value of your home
Some home improvements will inevitably boost the value of your home more than others.
Nick Leeming, chairman of estate agent Jackson-Stops, said buyers were increasingly looking for green energy measures in homes such as electric vehicle charging points.
He added: “We might see buyers start to negotiate on asking prices, prioritising a home purchase that is future-proofed from day one.”
Meanwhile, data from property buying company Open Property Group recommends 12 improvements that will boost the overall value of your property the most.
Loft conversions, costing around £40,000, can add £56,938 to the value of the average UK house price of £284,691.
A 20square foot extension, costing around £48,000, can add £56,938.
Meanwhile, a garage conversion can add £28,469 while only costing an estimated £15,000.
This is Open Property Group’s list of 12 home improvements, how much they cost and how much they’ll add to the value of your home:
- Loft conversion (£40,000 cost) – £56,938 added value
- 20square foot extension (£48,000 cost) – £56,938 added value
- Garage conversion (£15,000 cost) – £28,469 added value
- Garden room/office (£10,000 cost) – £21,352 added value
- Kitchen upgrade (£10,550 cost) – £15,658 added value
- Utility room (£8,730 cost) – £14,235 added value
- Solar panels (£7,000 cost) – £11,388 added value
- All over redecoration (£3,200 cost) – £8,825 added value
- Bathroom renovation (£5,000 cost) – £7,402 added value
- Boiler/central heating upgrade (£3,850 cost) – £5,409 added value
- EV charging point (£1,150 cost) – £4,840 added value
- Landscaped garden (£3,950 cost) – £4,270 added value
How else to boost the value of your home
Jonathan Rolande, from the National Association of Property Buyers, previously revealed to The Sun one quick tip to boost the value of your home when it comes to actually selling up – buying flowers and plants.
Doing this can increase the value of your home by thousands of pounds and create a greater demand among buyers.
“It increases the saleability,” he told The Sun. “You buy some nice plants, clean the rooms and the estate agent photos will look a lot better.
“This means you get more people looking around, more competition, and you can barter the price more.”
Giving your home a fresh lick of paint will boost its immediate value too, according to Chris Husson-Martin from Hamptons estate agent.
Adding a few lights to your home can add thousands to the value of your home as well, he told The Sun.
It’s worth moving any furniture that’s blocking windows around the house as well, to let any natural light in.
Do you have a money problem that needs sorting? Get in touch by emailing money@the-sun.co.uk.
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories.
EIGHT common features around the home could actually be knocking money off its value.
Halifax said house prices rose for a fifth consecutive month in February by 0.4% and 1.7% year-on-year.
The uptick might have you thinking of selling on your property and cashing in.
But you should be wary of a number of features that could actually make your home worth less, according to estate agent Yopa.
Ponds, artificial grass and unused or old swimming pools can knock up to 19.6% off the value of your home it turns out.
An unused or old swimming pool could slash your home’s worth by £55,799, based on the average UK property price of £284,691.
Got brown, unpainted Pebbledash on your external walls? That could be reducing the value by £28,469.
Meanwhile, poor parking options, or none at all, can slash your potential asking price by £19,359.
Artificial grass, having no lawn and no bath in the main bathroom can also see the average UK home value drop by £14,804, £6,100 and £5,694 respectively.
Having a north facing garden and pond can also see a home’s value fall by £5,525 and £5,258 respectively.
How to boost the value of your home
Some home improvements will inevitably boost the value of your home more than others.
Nick Leeming, chairman of estate agent Jackson-Stops, said buyers were increasingly looking for green energy measures in homes such as electric vehicle charging points.
He added: “We might see buyers start to negotiate on asking prices, prioritising a home purchase that is future-proofed from day one.”
Meanwhile, data from property buying company Open Property Group recommends 12 improvements that will boost the overall value of your property the most.
Loft conversions, costing around £40,000, can add £56,938 to the value of the average UK house price of £284,691.
A 20square foot extension, costing around £48,000, can add £56,938.
Meanwhile, a garage conversion can add £28,469 while only costing an estimated £15,000.
This is Open Property Group’s list of 12 home improvements, how much they cost and how much they’ll add to the value of your home:
- Loft conversion (£40,000 cost) – £56,938 added value
- 20square foot extension (£48,000 cost) – £56,938 added value
- Garage conversion (£15,000 cost) – £28,469 added value
- Garden room/office (£10,000 cost) – £21,352 added value
- Kitchen upgrade (£10,550 cost) – £15,658 added value
- Utility room (£8,730 cost) – £14,235 added value
- Solar panels (£7,000 cost) – £11,388 added value
- All over redecoration (£3,200 cost) – £8,825 added value
- Bathroom renovation (£5,000 cost) – £7,402 added value
- Boiler/central heating upgrade (£3,850 cost) – £5,409 added value
- EV charging point (£1,150 cost) – £4,840 added value
- Landscaped garden (£3,950 cost) – £4,270 added value
How else to boost the value of your home
Jonathan Rolande, from the National Association of Property Buyers, previously revealed to The Sun one quick tip to boost the value of your home when it comes to actually selling up – buying flowers and plants.
Doing this can increase the value of your home by thousands of pounds and create a greater demand among buyers.
“It increases the saleability,” he told The Sun. “You buy some nice plants, clean the rooms and the estate agent photos will look a lot better.
“This means you get more people looking around, more competition, and you can barter the price more.”
Giving your home a fresh lick of paint will boost its immediate value too, according to Chris Husson-Martin from Hamptons estate agent.
Adding a few lights to your home can add thousands to the value of your home as well, he told The Sun.
It’s worth moving any furniture that’s blocking windows around the house as well, to let any natural light in.
Do you have a money problem that needs sorting? Get in touch by emailing money@the-sun.co.uk.
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories.
HOUSE prices are more expensive than they were a year ago, the first time annual growth has been recorded in over a year.
Figures from Nationwide showed they were 0.7 per cent higher this February than the same month in 2023.
The average house price in the UK is now £260,420.
A year-on-year increase had not been recorded since last January as mortgages rocketed on the back of 14 interest rate rises by the Bank of England.
The annual growth in property prices gives fresh confidence that the housing market is now stabilising.
And it comes after official figures this week highlighted an uptick in mortgage approvals.
READ MORE ON HOUSE PRICES
Last year, buyers struggled to afford a mortgage as lenders raised interest costs on home loans.
The slowdown in the housing market has also meant more people have been trapped renting, which has driven rents to record high levels.
Meanwhile, the UK’s biggest property listings website Rightmove yesterday reported an eight per cent rise in pre-tax profits to £260million.
The increase was partly because estate agents were paying more to advertise properties and achieve sales in the slump.
M&S law win
MARKS & SPENCER has won its battle against Michael Gove’s attempt to block plans to demolish and redevelop its Marble Arch store in central London.
The minister last year refused permission on heritage and environmental grounds but the High Court has overturned his decision.
Asda pay rise
ASDA is spending £150million to be the best paying supermarket.
The grocer said it will raise salaries for 120,000 staff to £12.04 an hour — £13.21 inside the M25.
Co-owner Mohsin Issa said the firm was still in “a transition period”. He denied a rift with brother Zuber, who may sell his stake.
Good week
ANDREW Nisbet who will make at least £339million from selling his kitchen supply firm, Nisbets, to firm Bunzl.
Bad week
HALFORDS boss Graham Stapleton as shares fell by a quarter after warning of a bike part sales slump.
Own New in the UK has launched a mortgage product that will enable borrowers to take out a loan with an interest rate under 1% for those buying new builds – is this the new era of home financing, and will it catch on in Europe?
The Own New Rate Reducer product launched with Halifax, Virgin Money, and Barratt Developments today – 26 February – along with other housebuilders across the country joining from 4 March.
‘It could unlock lower mortgage rates and reduce your monthly payments, whether you’re a first time buyer or an existing homeowner,” Barratt Homes said on its website.
How does the Own New Rate Reducer work?
Dependent on the build stage of your chosen home, Barratt Homes said it could contribute either 3% or 5% of the purchase price towards your move.
The contribution goes directly to your mortgage lender (through the 3rd party Own New), which could subsequently reduce your mortgage interest rate by up to 3.19%.
Own New founder, Elliot Darcy, told the Financial Times: “Our ethos is to make home ownership and mortgage lending in this country open to more people and we are confident that the launch of the Own New Rate Reducer will achieve that.
“Alongside the national lenders and housebuilders who have signed up to the scheme, we believe that Rate Reducer will be a significant boost to many people’s home-buying dreams.”
Darcy also highlighted to the FT that “this is just the product” to stimulate the housing market and to give more people a “helping hand and initial boost” to get onto the property ladder.
However, many experts have criticised the new product, including Matthew Jackson, director at mortgage advisers Mint FS, who told Sky News: “Why would lenders and developers sign up to such a scheme? Is it to benefit buyers or themselves? I suspect it is the latter, with the removal of Help to Buy, lenders have a huge hole in mortgage lending and developers are struggling for sales.
“Without a doubt developers will use these affordable mortgages to increase house prices, meaning a premium will be paid for own new stock, and the payment shock at the end of the product will be enormous.
“Will the buyer be advised correctly? Doubtful. This has disaster written all over it.”
Will mortgages with rates below 1% catch on in Europe?
The Own New Rate Reducer is only available to those in the UK. For Europe, no such product is yet to be introduced.
As highlighted by Statista in a November 2023 report, mortgage interest rates tend to be lower in the Nordic countries due to the financial stability and reliability of its borrowers.
“Other factors that influence the mortgage interest rates include inflation, economic growth, monetary policies, the bond market and the overall conditions of the housing market,” Statista said on its website.
It also notes that more stable markets also tend to have higher average prices with France, Austria and Germany among some of the highest new dwelling prices in Europe.
Statista also recently highlighted how mortgage interest rates soared in Europe in 2022, resulting in many countries seeing rates double in just a year.
“During the COVID-19 crisis, mortgage rates in Europe were at their lowest, as countries tackled the economic effects of the pandemic. With inflation rising, central banks gradually increased the interest rates, resulting in higher mortgage borrowing costs. In Hungary, the average mortgage interest rate reached close to 10% in the first quarter of 2023, up from about 3.5% in 2022,” the data platform said.
Christopher Dingli worries his peaceful neighourhood will be forever changed when the 2032 Olympics comes to town.
The single dad sends his kids to East Brisbane State School, which could soon be bulldozed to make way for a bigger Brisbane Cricket Ground (Gabba).
Mr Dingli said he felt like the needs of overseas visitors were being prioritised over the needs of locals.
“I’m a little bit worried that we’re misplacing funds for infrastructure for the people who live here for two weeks,” he said.
“I’m a single dad, so we’re just getting by with the costs [of living] on a single income.”
New PRD research shows there have historically been sharp increases in house prices near Olympic venues, particularly in a 5 to 10-kilometre radius of stadiums and venues.
The paper analysed other Olympic cities such as Tokyo, Sydney and London, which saw significant house price hikes in the 12 months after the games.
PRD chief economist Diaswati Mardiasmo said suburbs that hosted Olympic events had become increasingly unaffordable for locals.
Dr Mardiasmo, a 2032 Olympics Committee member, said suburbs that hosted the Olympics had historically become “investor playgrounds” for overseas buyers.
“If we’re predicting those Olympic suburbs are going to go up in price, then their market is definitely not a first homebuyer market. It’s more of an investor market,” she said.
“You’re looking at that private investor, someone who wants to go into second home ownership or an investor who wants to expand their portfolio.”
Priced out of the neighbourhood
The paper’s authors said there was an average 14.3 per cent price spike in the year following major events, generally clustering around Olympic venues.
Based on these historical trends, the authors predicted today’s median house price in Brisbane’s Olympic suburbs could more than double by 2033.
They predicted Hamilton’s median house price could surpass $5 million, South Brisbane more than $2.8 million, and Ipswich more than $1.1 million.
Dr Mardiasmo said some suburbs could increase by upwards of 20 per cent.
The report noted that the number of houses being built was not keeping up with the current population growth, let alone future Olympic growth.
“Combined with the current lag in supply, such an imbalance, can lead to further property price growth,” the report said.
“A key question is whether or not the Olympics will make Brisbane, from a purchasing power perspective, as unaffordable as Sydney.”
Wollongabba, Brisbane city, and Hamilton were identified as key “epicentres” that would see the steepest price hikes due to Olympic activity.
Epicentres include the Brisbane Olympic Village, Brisbane Arena, Gabba redevelopment, and the Gold Coast Exhibition and Convention Centre.
Dr Mardiasmo said more and more Brisbanites were being priced out of home ownership in their suburbs.
“The market is completely different,” she said.
“We are finding more renters coming into the market because they can’t afford to buy a home.
“We’re seeing less and less first homebuyers coming into the market and committing to a higher amount of debt.”
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Northern Ireland saw the highest growth within the UK, where house prices increased by about 5.3% annually.
The outlook for the UK housing market seems to be a little brighter as house prices went up for a fourth consecutive month in January 2024, according to data from the Halifax House Price Index.
The Index revealed that the cost of an average house in the UK last month was estimated to set buyers back by about £291,029, which is £3,900 more expensive than in December. Good news for home owners but perhaps not for buyers.
The year-on-year Halifax House Price Index for January inched up 2.5% from 1.8% in December. This increase was also the most since January 2023. Meanwhile, month-on-month, house prices increased 1.3% in January, from 1.1% the previous month.
Northern Ireland leads the way in house prices
Northern Ireland saw the highest growth in the UK, with house prices jumping 5.3% annually. An average house in Northern Ireland is now valued at about £195,760, approximately £9,761 more than in January 2023.
Welsh and Scottish house prices also experienced robust growth, both inching up 4%, to £219,609 and £206,087 respectively. Yorkshire and Humber house prices grew by 2.8%, whereas houses in the North West became 3.2% costlier. East Midland houses only saw a 0.5% rise, but North East houses advanced 2%.
However, houses in the South East did not do as well as the rest of the UK, dropping about 2.3%, or £8,866 to an average of £379,220.
Kim Kinnaird, Halifax Mortgages director highlighted, as reported by Morningstar: “The recent reduction of mortgage rates from lenders as competition picks up, alongside fading inflationary pressures and a still-resilient labour market has contributed to increased confidence among buyers and sellers.
“However, while housing activity has increased over recent months, interest rates remain elevated compared to the historic lows seen in recent years, and demand continues to exceed supply. For those looking to buy a first home, the average deposit raised is now £53,414, around 19% of the purchase price. It’s not surprising that almost two thirds of new buyers getting a foot on the ladder are now buying in joint names.”
More likelihood of interest rate cuts in the next few months
Nationwide’s chief economist, Robert Gardner, said, as reported by The Guardian: “While a rapid rebound in activity or house prices in 2024 appears unlikely, the outlook is looking a little more positive.
“This follows a shift in view among investors around the future path of interest rates, with investors becoming more optimistic that the Bank of England will lower rates in the years ahead.”
On the other hand, the Bank of England (BoE) has maintained a more cautious stance, choosing to keep interest rates stable at 5.25% at its February meeting. Although independent economist and monetary policy committee (MPC) member Swati Dhingra suggested cutting interest rates immediately, the BoE chose to wait for more convincing data that inflation was taming.
However, the BoE also hinted at cutting interest rates in the next few months and revealed that it expects inflation to fall even more by summer.
A NEW tiny home space capsule may be the cheaper option for small-style living.
These new capsules called the Luban Cabin, offer affordability and quality for those who perfect a minimalist lifestyle.
The budget-friendly homes cost $20,000 and include panoramic windows, a bathroom, a bedroom and living room space.
A user in the comments of the YouTube video posted by Luban Capsule House shared that the house was approximately 37.7 feet long, about 10.8 feet wide, 10.5 feet high and weighed 21,000 lbs.
The capsule comes equipped with an aerospace aluminum shell that lasts over 50 years as well as double-layer insulated low E glass which provides insulation and soundproofing.
In another video posted by the company, they shared a walk-through of a fully furnished capsule.
The bathroom comes with a smart toilet, sink, shower and water heaters.
It also has a make-up mirror that changes light settings, which was mentioned in a third video.
While the bedroom has a projector, bed frame that could fit a king-size bed, mattress, bedding, and smart electric curtains that the company claimed are “all included in the package.”
It also has a skylight directly over the bed perfect for stargazing.
An outside deck space is also connected to the capsule.
They also noted that the windows are double layered to ensure durability and have a car-paint-like finish for easy cleaning.
The homes are also earthquake-resistant and wind-resistant up to level 12 winds and can withstand sub-zero temperatures.
Where to buy a tiny home
THE tiny home phenomenon found new heights as an alternative living solution for consumers concerned with ballooning homebuying costs and sustainability concerns.
*If you click on a link in this boxout, we may earn affiliate revenue.
You can buy ‘tiny homes’ online in a few places, including:
They also have a smart voice control system that runs through the home.
For security, the homes come with a smart password lock at the entrance.
The company suggests the home being placed at a scenic camp or serene vacation spot so you can make the most out of the open-like space.
Sydney, Canberra and Melbourne have long been touted as Australia’s most expensive cities when it comes to property, but after three years of a COVID-19-bolstered boom, Brisbane has climbed the ranks.
Since 2020, homes in Queensland’s capital have increased by 50 per cent, making it now the nation’s third most expensive city with median dwelling price of $787,217.
Corelogic data shows it’s the first time in 15 years that dwellings in the Greater Brisbane region are more expensive than Melbourne’s median price of $780,457.
Michael Deacon’s family had to get innovative to survive Brisbane’s booming property market, combining incomes with his mother-in-law to buy a home for three generations.
“It was pretty scary. We didn’t know what we were going to do,” he said.
“She was the one that actually suggested the idea to us.
“It’s a two-storey house but it’s complete dual living so an upstairs-downstairs, and it’s great for our daughter.”
While Mr Deacon’s mother-in-law Pat Smith had no mortgage on her home, rising interest rates coupled with the growing property market made her worry for her family’s future.
“We were thinking of leaving Brisbane altogether and going up to Yeppoon because prices were a bit cheaper, but we decided against that. It was too big a move,” Ms Smith said.
Brisbane remains seller’s market
While December’s median price for dwellings in Brisbane was more than Melbourne, the median house price was still cheaper in the Sunshine State at $875,991, compared to Victoria’s capital of $948,041.
According to Corelogic, units were also cheaper in Brisbane with a median price of $561,016, while the median price of units in Melbourne was $610,122.
Corelogic’s head of research Eliza Owen said the high amount of units in Melbourne, compared to Brisbane, brought down the dwelling cost overall.
“About a third of that market is units, which weighs down the median, as opposed to Brisbane, where only about 25 per cent of housing stock is estimated to be units,” Ms Owen said.
She said Brisbane would remain on top in the “tussle” against Melbourne in the short term, with prices in Queensland’s capital continuing to rise.
“Melbourne is actually still in decline, with values down about 0.3 per cent in the past four weeks,” she said.
While Brisbane remained “a seller’s market”, properties weren’t increasing in value at the same rate, with the monthly growth decreasing from 1.5 per cent in October to 1 per cent in December.
Ms Owen said flood-impacted homes could cause a further stabilisation of the market.
“Some people might find that they just want to get out of flood-prone areas altogether so that will impact demand and probably create some more variation in capital growth,” she said.
Brisbane’s continual rent increases ‘unheard of’
Renters in Brisbane are also under prolonged pressure, facing an “unheard of” streak of rental rises, with new figures showing rents increased steeply in the most recent quarter.
Released today, the Domain Rental Report shows Brisbanites are now paying an average of $600 per week for houses and $560 for units.
It marks the 10th consecutive quarter of growth for unit rents.
Domain’s chief of research and economics, Nicola Powell, said the state of the rental market was now at unprecedented levels.
“Ten consecutive quarters of unit rental growth is pretty much unheard of,” Dr Powell said.
“I think it really showcases the pressure that the rental market has experienced in Brisbane.”
She said record high rental prices showcase a serious lack of supply of rentals on the market, with rental vacancies at an all-time low back in February of last year.
Brisbane’s vacancy rate has increased slightly since then, to 0.9 per cent.
“It really showcases there hasn’t been enough investment activity across the city,” Dr Powell said.
She said demand was also outstripping supply as people moved in droves from interstate and overseas.
There is some hope for renters this year, with signs the rate of increase is slowing slightly — not just in Brisbane but across the country.
Domain’s report shows combined rents across Australia’s capital cities held steady for the first time in almost three years, ending its own stretch of 10 consecutive quarterly increases.
Across the nation, the average house and unit rent were each $600 per week.
At the end of 2023, Sydneysiders paid an average of $730 per week to rent a house, the most of any city across the nation.
Hobart saw the highest increase after the average rent rose by $20 per week during the last quarter, to $550 per week.
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“When even the head of the central bank cannot afford rent, what can public servants or minimum wage earners do?” Turkish citizens ask on social media.
“We haven’t found a home in Istanbul. It’s terribly expensive. We’ve moved in with my parents.”
So says Hafize Gaye Erkan, the new head of Turkey’s central bank who, in an interview with Turkish media, slammed Istanbul’s skyrocketing rent prices.
“Is it possible that Istanbul has got more expensive than Manhattan?” she asked.
Many Turks have taken to social media, seemingly incredulous that even the 44-year-old governor, who previously worked at financial firms including Goldman Sachs and First Republic Bank, cannot afford her rent.
“Even when the head of the central bank cannot afford rent, what can public servants or minimum wage earners do?” many have asked.
Unfortunately, it’s not a new issue: Sema Dumanli, associate professor at Turkey’s top-ranking Bogazici University, highlighted the problem more than a year ago by sharing the rental price of a flat in Istanbul (€1,094) and her payslip (€897) on social media.
The rent was 20% higher than her monthly net salary, with Dumanli decrying that academics’ salaries are not enough for basic life.
At the time of her post in October 2022, annual house price inflation was 205%, according to the Central Bank of the Republic of Turkey (CBRT).
Meanwhile, official rent inflation, referring to the year-on-year price change of housing rentals, stood at 41%, according to Turkey’s official statistical office (TurkStat).
However, Bahçeşehir University’s Center for Economic and Social Research (BETAM) put the annual increase at 146%, based on Turkey’s most popular classified ads.
In November 2023, the monthly average rent per square metre was 128.4 Turkish lira (€4.20) in Turkey and 166.7 lira in Istanbul specifically, according to BETAM. That meant the rent for a 70 square metre house was €378, while the monthly net minimum wage was €369. The rent price does not include utility bills.
In Turkey, the average net salary of a teacher is around €847, while an average police officer takes home about €938.
In January 2024, the monthly net minimum wage rose to €520. The salaries of public servants also increased by around 50%. However, rents are expected to keep increasing due to inflation too.
An Istanbul Planning Agency (IPA) report from the Istanbul Metropolitan Municipality indicates that the monthly net minimum wage in Istanbul has been less than 100% of the average rent for the past 2.5 years, as of September 2023. This implies that those earning the minimum wage cannot afford their rents.
All these figures combined show the extent of the grave cost of living crisis hovering over Turkey.
How did house and rental prices skyrocket so quickly?
“Turkey has no choice but to return to a rational basis,” the country’s Finance Minister Mehmet Şimşek said at a handover ceremony with his predecessor Nureddin Nebati in early June.
“Transparency, consistency, predictability and compliance with international norms will be our basic principles in achieving the goal of raising social welfare”, he added, signalling an intention to move away from the government’s previous volatile strategies.
Put simply, Turkey’s economic data suggests house and rental prices have skyrocketed as a result of the government’s previous “irrational” policies, as described by Şimşek, who previously served as Finance Minister and Deputy Prime Minister between 2009 and 2018.
Turkey’s “new economic model”
Part of these policies came in under Turkey’s “new economic model” in September 2021, which prioritised growth, investment and exports.
President Recep Tayyip Erdoğan had long argued that lowering interest rates helped fight inflation, in direct contrast to mainstream expert views.
During the implementation of this “new economic model”, annual consumer inflation soared to its highest level (86% in October 2022) since Erdoğan first took office.
The annual house price inflation rate, which hadn’t exceeded 35% in the 10 years up to September 2021, exploded to 189% country-wide and 212% in Istanbul in just one year under the new model, according to figures from the CBRT.
While the central bank cut its key interest rate from around 19% in 2021 to 8.5% earlier this year, under Erdoğan’s previous policy of lowering interest rates, the bank has changed course following the appointments of Şimşek and Erkan, hiking its main interest rate from 8.5% to 42.5% in just a few months.
Rent inflation and general consumer inflation
The annual general consumer inflation also skyrocketed under the “new economic model”.
Rent prices are supposed to increase in line with inflation. However, the Turkish government capped rent increases at 25% in July 2022, which has now been extended to July 2024 to address the growing anger following the country’s elections in May last year.
The difference between the rent and general consumer inflation rates has significantly increased. In October 2022, annual consumer inflation was 86% whereas rent inflation was 41%.
25% cap on rent increase didn’t work
However, independent research centre BETAM’s report indicated that the annual rent inflation was 159% in October 2022. The annual general consumer inflation rate was also found to be 185 % by the independent Inflation Research Group (ENAG).
In 2022, a survey by MetroPoll showed that a huge majority (82%) of people did not believe TurkStat’s inflation rate in 2022.
As of November 2023, the annual rent inflation reached 106% according to the TurkStat. This clearly shows a 25% cap on rent increases have not been working.
Violent disputes between landlords and tenants
The substantial gap between this 25% cap, official annual inflation and rent prices in the market has also caused violent landlord-tenant disputes. At least 11 people were killed and around 50 people have been injured in these clashes, while hundreds of people have been arrested over the disputes.
How have flat prices changed in the past five years?
CBRT releases house unit price data in Turkey, which it calculates by dividing the value of a property by its gross area of use. Dwelling prices indicated in valuation reports prepared at the time of approval of individual housing loans are used as a proxy for price.
When we calculate the price of a flat – 96 square metres in our simulation – a dramatic increase even is striking even in euros.
The price of a flat in Turkey rose, on average, from €40,698 to €98,042 between October 2018 and 2023: a 141% increase.
In Istanbul, it climbed from €72,866 to €144,886 in this period, making it a 99% increase.
In the same period, the Euro/Turkish Lira exchange rate jumped from 6,75 to 29,41.
Minimum wage vs house prices
In Turkey, comparing minimum wage and house prices is also relevant as Turkey has become a country of minimum wage earners. In 2022, the proportion of employees earning less than 120% of the minimum was 58.4%, according to the Confederation of Progressive Trade Unions of Turkey (DİSK-AR).
When monthly minimum wage and house unit prices in Istanbul and Turkey were indexed to 100 in January 2018, the chart shows how each index changed over almost six years.
The minimum wage index went over house prices until mid-2021. While the nominal minimum wage considerably rose under the “new economic model”, the house price index both in Turkey and Istanbul exceeded the minimum wage index. The gap has been on the rise.
Earthquake and house sales to foreigners
Analysts also suggest that last year’s devastating earthquake and house sales to foreigners may have contributed to the increase in rents and house prices.
The two earthquakes hit Turkey’s southeastern provinces in February. Thousands had to move to other cities.
The number of houses bought by foreigners has dramatically increased over the past decade. Buying a property in Turkey comes with the eligibility to apply for Turkish citizenship if it costs more than $400,000 (€364,292). That price was $250,000 (€227,721) until 2022.
In 2021, foreigners bought 3.9% of the houses sold in Turkey, according to TurkStat.
Between 2013 and mid-2022, the total number of properties bought by foreigners exceeded 310,000.
Turkey is an outlier in house price inflation
According to Eurostat, the EU’s official statistical office, Turkey is an outlier in nominal house price inflation.
Between the second quarters of 2022 and 2023, the house prices in Turkey almost doubled (95.9%), whereas it fell 1.1% in the EU.
Turkey is followed by Croatia and Bulgaria where the rise was 13.7% and 10.7%, respectively.
In eight EU countries and the UK, house prices fell in this period.
Germany recorded the highest decline by 9.9%, followed by Denmark (7.6%) and Sweden (6.8%). House prices decreased by 3.5% in the UK.
House ownership is on the decline
Looking at the proportion of people owning their own home, there has been a gradual decline in the last 15 years.
In 2014, 61.1% of households owned their dwelling, according to TurkStat. This proportion has been falling every year since then, hitting 56.7% in 2022.
By contrast, the proportion of tenants rose from 22.1% to 27.2% in this period.