Increases in Ireland’s house prices have vastly outstripped any rise in wages seen over the past 10 years, according to Government statistics.
Two new reports by the Parliamentary Budget Office, the Oireachtas’ independent economic analysis arm, shows that average house prices doubled from €153,000 to €305,000 between 2013 and 2022.
However, at the same time, the median salary of a single person increased by 26% from €33,000 to €41,800, while the income of couples increased from €66,100 to €83,600.
The median is the middle figure in a row of numbers sorted from top to bottom, as opposed to the average.
The jump in median house prices of €25,000 in 2022 was the largest since 2017.
The worst ratio of cost to income seen anywhere in Ireland at the end of 2022 for couples was in the Dún Laoghaire-Rathdown local authority area, which has consistently seen the highest prices versus income level, with a ratio of 6.8:1. The lowest were in Leitrim, Roscommon, and Longford at 2.1:1.
Separately, the Parliamentary Budget Office noted that counties with the lowest number of new home completions per 1,000 population had the highest percentage increase in house prices.
Tipperary and Longford both saw annual property price increases of 8%, compared with new dwelling completions of just 3 and 2.6 completed dwellings per 1,000 people, respectively.
Cork city and Cork county were on the lower end of the inflationary scale, with the city showing property price hikes of 3% versus dwelling completions per 1,000 people of 4.6, while Cork county showed 1% and 5.6 for the same metrics, respectively.
Wicklow, meanwhile, was the county scoring best on the
Parliamentary Budget Office’s evaluation scale, the only county to show a reduction in property prices of 2% for 2023 along with one of the higher dwelling completion rates of 9.1 units finished per 1,000 people.
There are far too many goods and services for which you can say Americans pay the highest prices in the world. One of those outliers was likely put to an end late last week, thanks to a remarkable settlement in a private antitrust case. The outcome shows that too many of America’s high costs are often a function of power, and that the tools to check that power and lower those costs cannot be unilaterally found at the Federal Reserve.
The National Association of Realtors (NAR) has agreed to end the age-old practice of 6 percent agent commissions for residential home sales, which are six times the level of the U.K. According to The New York Times, which first got the news, the settlement could drop U.S. commission costs by as much as 30 percent, which comes out to more than $8,000 on a home sale with the average purchase price of $417,000. It’s not going to suddenly make housing affordable, though the collusive arrangement did tend to drive home prices higher. And given that real estate commissions are a $100 billion-per-year business, we’re talking about $30 billion in savings, a not-incidental amount at a time when housing costs are a primary driver of inflation.
The end of the 6 percent commission is another example of the intelligent design of the Sherman Antitrust Act, with its private right of action. NAR is a powerful lobby that would have never let this happen if they had the wherewithal to stop it. But it had no politicians or regulators to persuade in this case; a group of Missouri homeowners and their legal team were the chief antagonists.
TYPICALLY IN A REAL ESTATE SALE, sellers pay a commission to their agent to manage creating the listing, making the home available for viewing, accepting offers, and closing the deal. But there’s a form of collusion involved: The buyer’s agent gets a share of that commission. That’s true despite the fact that it’s hard to understand why two agents are essential to a real estate sale. In the past, a buyer’s agent would find listings for clients, but in the age of Zillow and Redfin, purchasers have no problem doing that themselves. Worldwide, buyer agents are involved in only one-third of all sales; in the U.S., it’s about 89 percent.
This persisted because of a cartel-like scheme, coordinated through NAR and major real estate brokers. In the 1990s, NAR set a rule for their agents, known as the cooperative commission rule, requiring that any home listed for sale on a multiple listing service (MLS) include the commission rate that the seller will give to the buyer. Large brokers copy the NAR rule. These rates were allegedly negotiable, but in reality were mandatory. They are also based on percentages of the sale, so if home prices go up, so did the agent’s fee. That gives an incentive to the middlemen in the system to uplift listing prices and buyer offers.
Without getting on the MLS, few prospective homebuyers would see the listing; that’s how you’re finding those homes on Zillow and Redfin. This locks in the commission on both sides of the transaction. The sellers must compensate the buyer’s agent, and they coordinate their compensation to keep those rates standard, without negotiations. The buyer’s agent knows what houses will draw the standard commission. That way they can steer clients away from “For Sale by Owner” listings or other arrangements where the commission amount isn’t specified. This also tends to push prices upward.
Other services attempting to enter the real estate market, like a startup called Trelora that promised lower buyer commissions, were prevented from getting MLS data by large brokers and NAR. There was next to no escape from this agent commission cartel.
Commissions are folded into the sale price. They make houses a little bit more expensive through a concealed form of price-fixing. For 30 years, buyers and sellers endured this, until advocates and class action lawyers determined it was illegal, and sought to prove that in court.
Commissions are folded into the sale price. They make houses a little bit more expensive through a concealed form of price-fixing.
It took several years. NAR refused to settle a 2019 class action case alleging anti-competitive conduct, which went to trial before a federal judge in Kansas City. In October, a jury awarded the plaintiffs $1.8 billion in damages, just for home sellers in Missouri. (The sellers brought the case, saying that they shouldn’t be forced to pay out the buyers’ agents.) Because it’s an antitrust case, the judge was able to triple those damages to $5.4 billion if he wanted.
The same lawyers in the Missouri case quickly filed a national class action, and there were almost a dozen other lawsuits teed up. For context of the liability at play here, another case involving 20 large housing markets was set for trial shortly. If it were decided in the same manner as the Missouri case, damages could reach $40 billion. NAR had no available funds to even pay the Missouri damages, let alone other ones.
So they decided to settle. The fine of $418 million is in many ways the trivial part; NAR also agreed to eliminate the cooperative commission rule, end the requirement that brokers subscribe to the MLS, and mandate that all fee arrangements between buyers and agents be put down in writing. This should end most lawsuits over commissions, and come into effect by this summer. (The broker HomeServices of America, which is a Warren Buffett company, is still fighting this out in court, which should tell you something about America’s cuddliest billionaire.)
THIS WILL UNLOCK COMPETITION in a closed market. I’d expect services offering discounted rates or flat fees for real estate sales. And buyers may not have agents at all, simply someone to represent their interests at closing. You likely haven’t been to a travel agent in the last 20 years because you can do it yourself online. That’s what we could potentially see for homebuyers in the very near future.
Whatever results will require antitrust oversight. A large tech platform like Amazon or Google could undercut the entire market to gain share, and then recoup down the road when they’re the only option in town. Regulators will have to remain involved to ensure real estate agents don’t just shift from one cartel to another.
This will also likely lead to a mass exodus of agents from the real estate business, which for many was a side hustle of relatively easy money. Three million Americans have real estate licenses in America, compared to about 48,000 in the U.K., which has one-fifth the population. There are about 1.5 million active NAR realtors, and many of them will now have little reason to stay with the lobby shop. That’s good news for weakening the power of an organization that was influential enough in Washington to keep this collusive arrangement in place. And it means that other measures to improve the housing market for Americans, like incentives to add housing supply, won’t be subject to as powerful a lobby for the status quo.
(By the way, NAR’s past president, Kenny Parcell, resigned amid sexual harassment allegations last August; his replacement, Tracy Kasper, spent about four months in the top slot before resigning after being threatened with blackmail. It’s not exactly a tip-top operation poised to weather this storm.)
Nobody wants to see a million jobs or more incinerated. But an economy predicated on middlemen isn’t beneficial or stable. Real estate agents didn’t really get rich from the commission arrangement, because higher home prices lured more agents into the market. Fewer agents mean that the ones who are honest, hard-working, and good at their jobs will thrive, with lower rates but more activity. The brokers and NAR, who control the listing services, were the true beneficiaries of this cartel, and squeezing them out of the system will help everyone else.
An old settlement of a price-fixing case against NAR blocked the newly aggressive leadership at the Justice Department’s Antitrust Division from bringing an unfair competition case. (DOJ has been issuing strong briefs in private cases.) But “private attorneys general” helped right the wrongs in this market, thanks to the opportunity afforded under our antitrust laws. That will come in handy as even more hidden forms of price-fixing, embedded in algorithms and other forms of technology, proliferate.
We tend to think of inflation as the exclusive province of monetary policy, leaving it up to technocrats to twist dials on interest rates to manage prices. This settlement shows that cartel behavior is both rampant and often beyond the purview of central bankers. Strong oversight by the public, both through their elected representatives and through their own powers, is needed to counteract this growing area of overstuffed prices.
WASHINGTON — Lori Shelton can’t fathom ever having the money to buy a home — and that’s a major reason why so many voters feel down on the economy ahead of this year’s presidential election.
Shelton, 67, drives an Uber to help pay rent in Aurora, Colorado. An advance on her pay covered her apartment’s security deposit. But it also cut into her next paycheck, leaving her bank account dangerously low when the rent was due — a cycle that never seems to end.
“I’m always one step behind,” said Shelton, her voice choking up. “It’s a nightmare, it’s a freaking nightmare right now.”
The United States is slogging through a housing affordability crisis that was decades in the making. At the root of this problem: America failed to build enough homes for its growing population. The shortage strikes at the heart of the American dream of homeownership — dampening President Joe Biden’s assurances that the U.S. economy is strong and underscoring the degree to which Republican Donald Trump, the former president and presumptive GOP nominee for 2024, has largely overlooked the shortage.
The lack of housing has caused a record number of renters to devote an excessive amount of income to housing, according to a Harvard University analysis. Not enough homes are for sale or being built, keeping prices elevated. Average mortgage rates have more than doubled and further worsened affordability.
In fact, the Census Bureau reported that homeownership fell slightly at the end of last year in an otherwise solid economy. If it wasn’t for shelter costs, inflation — Biden’s most pronounced economic problem — would be running at a healthy and stable 1.8%. Instead, it’s hovering around 3.2%.
Administration officials are confident that shelter inflation will soon cool, but the damage across several years is apparent to advocates and economists.
“I’ve been doing housing work for 30 years — the housing affordability challenge is the worst I’ve ever seen in my career,” said Shaun Donovan, a former secretary of Housing and Urban Development in the Obama years who now leads the nonprofit Enterprise Community Partners.
Donovan noted that this is an increasingly bipartisan challenge that could bring the political parties together. Expensive housing was once the domain of Democratic areas such as New York City and San Francisco. It’s now moved into Republican states as places such as Boise, Idaho, grapple with higher prices.
“It is a first-tier issue almost everywhere,” he said. “And that is changing the national politics around it in a way that I think is quite different than I’ve ever seen.”
Mark Zandi, chief economist at Moody’s Analytics, said that the outcome of the November election could ultimately depend on the path of 30-year mortgage rates.
Rates currently average about 6.74%. If they dropped closer to 6%, the odds of a Biden victory would increase. But rates moving near 8% might enable Trump to prevail, Zandi said.
“Given the current housing affordability crisis, higher rates will make owning a home completely out of reach for nearly all potential first-time homebuyers,” he said. “Since homeownership is a key part of the American dream, if it appears unattainable, this will deeply impact voters’ sense of the economy.”
Biden, a Democrat, acknowledged the pain many are feeling in his State of the Union address earlier this month and in his budget proposal released on Monday.
The president wants to fund the building and preservation of 2 million housing units — a meaningful sum, but not enough to solve the shortage. He also proposed a tax credit worth up to $10,000 to homebuyers. Over the past three years, he has increased rental assistance to 100,000 households.
“The bottom line is we have to build, build, build,” Biden said Monday in a speech to the National League of Cities. “That’s how we bring down housing costs for good.”
Rapidly climbing home prices were also a festering problem under Trump, who first achieved celebrity status as a real estate developer. While president, Trump called for limiting construction in the suburbs. He claimed during the 2020 election that Biden’s policies to spur building and affordability would “destroy your neighborhood.”
During the 2018 to 2020 years of Trump’s presidency, the country’s housing shortage surged 52% to 3.8 million units, according to the mortgage company Freddie Mac.
The Associated Press contacted Trump’s campaign for his policy plans but did not get a response. The America First Policy Institute, a think tank promoting Trump’s vision, said the key is to cut government borrowing to reduce mortgage rates. The former president has pledged to reduce deficits, but an analysis by the Committee for a Responsible Federal Budget shows that his policies in office will have likely added more than $8 trillion to the national debt.
“The best way for us to improve access to homeownership for young people is to get interest rates back down, not to provide subsidies that cause housing unaffordability to worsen,” said Mike Faulkender, chief economist at the institute.
Lower rates might play well with voters, but most economists say they would at best offer temporary financial relief. Purchase prices would likely adjust upward in response to greater demand from falling rates.
Construction, the more enduring solution, would take years to achieve and require new rules by states and cities. The administration is trying to incentivize zoning changes, but the major choices are outside the White House’s control.
“Even as incomes are going up and the economy is doing well and inflation is coming down, people can’t buy homes,” said Daryl Fairweather, chief economist at the brokerage Redfin. “That’s like the biggest problem for Biden because it’s not one that he can solve.”
The general rule of thumb is that people should pay no more than 30% of their income on rent or a mortgage. A typical household looking to buy a home would have to devote 41% of its income to mortgage payments, according to Redfin.
There are far-reaching economic risks because of this. High housing costs can lead people to cut back spending elsewhere. Advocates said it enables landlords to neglect their properties since there is always a ready tenant.
Evictions can worsen health and educational outcomes for children and exact an even wider cost on society, said Zach Neumann, a Denver-based lawyer who provides more than $30 million annually in rental assistance through the nonprofit Community Economic Defense Project.
The cumulative costs of evicting poorer renters are “$20,000 to $30,000 a year when you include shelter nights and emergency room visits,” Neumann said. “It’s really overwhelming when you think about the total numbers and these folks are fighting to have a roof over their heads.”
While there is bipartisan agreement on the need for more housing, there has yet to be a significant plan that has passed the House and Senate. Biden has proposed housing aid throughout his administration that never materialized.
“Had Congress passed some of the investments that the president has called for since the beginning of the administration, had they done that three years ago, as he was advocating, we’d have affordable units coming online right now,” said Daniel Hornung, deputy director of the White House National Economic Council.
But Mark Calabria, who was director of the Federal Housing Finance Agency during the Trump administration, said that many of the federal tools to increase housing such as the Low-Income Housing Tax Credit could further push up demand without adding enough construction.
“My worry would be we’ve done a number of things that increased demand when the problem is supply,” said Calabria, now an adviser with the libertarian Cato Institute.
But for renters such as Lori Shelton in Colorado, the debate about how to add housing supply is cold comfort when she owes rent now. She’s previously dealt with the threat of eviction and late fees. She gets some rent money from her son, but she has also relied at times on her church to cover the $2,399 a month.
“I don’t think the majority of us have that savings account,” she said. “If you spend that much on your rent and your groceries and your car and your bills, you don’t have much for a fallback.”
More homeowners eager to sell their home are lowering their initial asking price in a bid to entice prospective buyers as the spring homebuying season gets going.
Some 14.6% of U.S. homes listed for sale last month had their price lowered, according to Realtor.com. That’s up from 13.2% a year earlier, the first annual increase since May. In January, the percentage of homes on the market with price reductions was 14.7%.
The share of home listings that have had their price lowered is running slightly higher than the monthly average on data going back to January 2017.
That trend bodes well for prospective homebuyers navigating a housing market that remains unaffordable for many Americans. A chronically low supply of homes for sale has kept pushing home prices higher overall even as U.S. home sales slumped the past two years.
Home prices last year rose an average of 6.7% in the country’s 20 biggest metro areas, according to the latest S&P CoreLogic Case-Shiller data. Across the nation as a whole, housing prices rose than 5% over the last year. Driving the increase are higher mortgage rates, which makes homeowners reluctant to sell their properties given the elevated costs of finding a new place, coupled with a dearth of homes on the market.
“It’s just a sort of toxic brew that means that people are not willing to sell houses, and the people who are actually looking for them don’t have a lot of stock, or don’t have a lot of affordable options,” said Javier E. David, managing editor for business and markets at Axios, told CBS News in February.
Just in time for spring, however, prices are beginning to thaw.
“Sellers are cutting prices, but it just means we’re seeing smaller price gains than we would otherwise have seen,” said Danielle Hale, chief economist at Realtor.com.
The pickup in the share of home listings with price cuts is a sign the housing market is shifting back toward a more balanced dynamic between buyers and sellers. Rock-bottom mortgage rates in the first two years of the pandemic armed homebuyers with more purchasing power, which fueled bidding wars, driving the median sale price for previously occupied U.S. homes 42% higher between 2020 and 2022.
“Essentially, the price reductions suggest far more normalcy in the housing market than we’ve seen over the last couple of years,” Hale said.
The share of properties that had their listing price lowered peaked in October 2018 at 21.7%. It got nearly as high as that — 21.5% — in October 2022.
Last year, the percentage of home listings that had their asking price lowered jumped to 18.9% in October, as the average rate on a 30-year mortgage surged to a 23-year high of 7.79%, according to Freddie Mac.
Mortgage rates eased in December amid expectations that inflation has cooled enough for the Federal Reserve begin cutting its key short term rate as soon as this spring. Those expectations were dampened following stronger-than-expected reports on inflation and the economy this year, which led to a rise in mortgage rates through most of February.
That’s put pressure on sellers to scale back their asking price in order to “meet buyers where they are,” Hale said.
That pressure could ease if, as many economists expect, mortgage rates decline this year.
Who doesn’t love a deal? Homebuyers certainly do.
With home prices and mortgage rates uncomfortably high, many aspiring homebuyers are desperate to find ways to save money on what might be the largest purchase they will ever make.
Nationally, home prices rose 0.3% year over year in February, to a median of $415,500, according to Realtor.com® data. But there are places where home prices are falling.
Yes, you read that correctly.
Homebuyers can save a pretty penny in these housing markets, which span the pricey West Coast to the more affordable South and Midwest regions of the country, according to a recent Realtor.com report.
“A lot of the [housing] inventory that’s coming onto the market is in a more affordable price tier,” says Realtor.com Chief Economist Danielle Hale. “When you have more affordable listings coming onto the market, it’s also going to push down the overall price.”
The number of homes for sale increased in all but two of these markets. When there are more options for buyers to choose from, that also helps to keep prices in check.
To come up with its findings, the Realtor.com economics team compared median list prices in February 2024 with February of 2023 in the 50 largest metropolitan areas.
Why home prices have come down by so much in Miami
The COVID-19 pandemic hot spot of Miami experienced the largest price declines. The median home list price fell 8.2% year over year, to a median price of $550,000 in February. Meanwhile, the number of homes for sale in the metro shot up 37.4% in February compared with the same month a year earlier.
The price drops are a sharp, 180-degree turn for the Magic City. Prices surged along with the temperatures over the past few years as more folks from other parts of the country moved to the metro.
“There was a COVID craze the last few years. We had so many people come from New York and California,” says Sam DeBianchi, a Realtor® at DeBianchi Real Estate in Fort Lauderdale, FL. She also does business in nearby Miami.
More than 117,000 New Yorkers moved to Florida in 2021 and 2022, according to figures from the Florida Department of Highway Safety and Motor Vehicles. In 2023, 53,581 moved into the state.
Prices in the metro spiked, hitting a high of $625,000 in June, representing a staggering 56% increase over just two years. But what goes up must eventually come down.
“Sellers over the last few years were really inflating their asking prices because they were getting them,” says DeBianchi. “This year is really when reality has hit, and you’re seeing those price drops. I don’t think it’s anything to panic over. Most sellers are still making money. They’re just not making as much money.”
The rising cost of insurance is also bringing home prices down in the coastal Miami area.
“Florida’s condo market is faltering as the increasing intensity of natural disasters pushes up home insurance costs, and HOA fees soar in the wake of the 2021 Surfside condo collapse,” says luxury real estate agent Jenny Lenz. She is the managing director of Dolly Lenz Real Estate. “New condo listings are soaring as sellers try to offload their properties.”
Where home prices are falling across America
Several traditionally more affordable, Midwestern markets also saw prices fall. Hale attributed the price cuts in Oklahoma City, Cincinnati, and Kansas City, MO, as a result of more smaller, cheaper homes going up for sale. This has helped to drag down the median list prices in these metros.
Prices are also down in some of the nation’s priciest metros on the West Coast. Median home list prices slipped 2.3% in San Jose, CA, the heart of Silicon Valley, and ticked down 1.3% in San Francisco.
“Those areas are very closely tied to the technology industry, and tech has been on a bit of a roller coaster over the last couple of years,” says Hale.
Prices fell sharply in those metros during the pandemic as workers who were newly permitted to work remotely moved to cheaper parts of the country. Then as these areas rebounded, the tech industry was rocked by layoffs. Now, many tech companies in the area are focusing on artificial intelligence.
“You had some excitement about what AI might mean for the Bay Area, and some sellers might be trying to capitalize on that,” says Hale. “New listings are also up in the [San Francisco] Bay Area.
“We’re at a point in time where your experience in the real estate market depends on where you are,” says Hale. “It’s more local now than it has been at other points of time.”
These are the cities where home prices are falling the most:
February median home list price: $550,000
Median list price year over year: -8.2%
February median home list price: $323,000
Median list price year over year: -7.4%
February median home list price: $337,000
Median list price year over year: -6.4%
February median home list price: $421,000
Median list price year over year: -4.9%
February median home list price: $610,000
Median list price year over year: -3.6%
February median home list price: $1.367 million
Median list price year over year: -2.3%
February median home list price: $440,000
Median list price year over year: -2.2%
February median home list price: $335,000
Median list price year over year: -1.5%
February median home list price: $989,000
Median list price year over year: -1.3%
This story was originally published on Realtor.com, a real estate and rentals site. In addition to homes for sale, you can find rentals like Scottsdale apartments, Austin apartments, Tampa apartments, and more.
February median home list price: $600,000
Median list price year over year: -1.2%
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Ireland is currently facing a housing crisis due to decreasing investment and a rising population.
Ireland house prices could continue rising for the near future, the Economic and Social Research Institute (ESRI) has warned the Oireachtas Committee on Budgetary Oversight.
This is mainly due to low investment and rapidly increasing population, causing demand to overtake supply. According to Ireland’s Central Statistics Office, only 66% of Irish houses are owner-occupied, a significant fall from about 79% in 1991. Data from the Residential Tenancies Board and ESRI estimate the average Dublin rent now to be about €2,102.
In its opening statement, the ESRI, as reported by The Irish Times, said: “Ireland was among the countries with the lowest investment in housing in the EU in 2022, only exceeding Greece, Poland, and Bosnia and Herzegovina. As a result, the rise in house prices and rents is likely to continue, albeit at a slower pace in the case of house prices.”
Early on this year, ESRI, reported by the BBC said: “It is almost certain that existing targets for housing supply understate need, given the stronger than expected increase in the population shown by early results from the 2022 Census. Hence, higher output will be needed.”
Why is Ireland facing a housing crisis?
One of the biggest reasons why Ireland is facing a housing crisis is due to lower investment as the economy is still reeling from the effects of the pandemic, high inflation and weaker economic growth.
Higher interest rates have also contributed to more developers hesitating to take on too much debt. This has led to several housing projects being either halted midway or postponed.
Regulatory changes following the financial crisis, as well as zoning restrictions have also severely limited the availability of affordable housing, hitting low and middle income earners the worst. This has in turn contributed to rising homelessness and rapidly increasing rents and mortgages.
The impact of the Irish housing crisis can also be felt on the country’s business and productivity sectors, with several choosing or being forced to move out of urban cities, or the country altogether in search of affordable housing.
This could be devastating on the competitiveness of the country, especially when it comes to attracting foreign investment and companies.
ESRI research professor Kieran McQuinn, as reported by The Irish Times said about the crisis: “Certainly it is impacting on competitiveness in the economy. You are hearing a lot of information about multinationals raising it as an issue, and raising it as a fairly significant issue from their perspective.
“They pay very good wages – probably the best wages in the economy – but if a large proportion of those are going on housing costs, it raises issues for them.”
Rising immigration and the refugee crisis in the last few years have also led to a quickly deteriorating situation.
Hungarian house prices have climbed by more than 166% since 2015, but there’s a country with an even more eyewatering increase.
The price of an apartment in Istanbul is now in close competition with those in infamously expensive cities such as Paris and London, as figures show that Turkish house prices are 12 times higher than they were nine years ago in nominal terms.
Among OECD member states, northern European countries such as Sweden and Finland have seen the smallest change, with more than 4% increases in nominal housing prices since 2015.
On the other end of the scale sits transcontinental Turkey, followed by Hungary, where prices are 166% more than they were in 2015.
The majority of OECD countries saw their house prices rise well into the double digits between 2015 and 2023. Still, Turkish prices particularly stand out from the crowd, pushing the rental prices so high that even the country’s central bank governor can’t afford to rent.
However, while Turkish housing prices have risen gradually since 2015, they only started climbing at a brake neck speed in 2021.
They reached their peak in 2022, when house prices went 168% up in a year, followed by a rise of 76% in 2023.
Meanwhile, across Europe and the US, house prices took a hit in late 2022 as central banks in these economies started hiking up interest rates to tackle high inflation, which pushed up mortgage rates in the process.
On the flip side, the Turkish central bank lowered its benchmark rate in August 2022, even though in November of that year inflation in the country was close to 85%.
Experts put the soaring escalation of nominal property prices in Turkey down to a mix of reasons.
“The actual change starts from 2020,” said Görkem Yapan, real estate and construction sector leader for the Turkish market at KPMG. “The main reasons I believe, are the currency fluctuation, the devaluation of Turkish lira, higher inflation rates and the consequent increase in construction costs, and also the growing demand after the pandemic.”
Turkey’s inflation rate in 2022 was extremely high, more than 50% for almost the entire year, reaching above 80% in October. However, real-term house prices (adjusted for inflation) also climbed by 96.7% by the third quarter of 2023 compared to 2015, according to the OECD.
“We experienced last year earthquakes, affecting 11 cities in Turkey, that also boosted the prices, because people want to live in more secure places like earthquake-resistant buildings,” said Yapan.
You think you have a high mortgage? Think again…
While cash buyers flooded the market, people with mortgages in Turkey have seen their monthly rates skyrocket: the extreme levels of inflation in Turkey, which recently reached almost 70%, triggered the central bank to aggressively tighten its monetary policy and raise the benchmark rate from 8.5% in June 2023 to 45% in January 2024.
As a result, mortgages in Turkey now have an annual 40% interest rate. Also, the maximum mortgage up for grabs covers no more than one-fifth of the price of a house.
Throughout 2023, less than 15% of houses sold had a buyer with a mortgage. The rest were sold to cash buyers.
Are Russians buying up the Turkish property market?
Starting in 2022, the most significant portion of houses sold to foreigners went to Russians, followed by Iranians.
“Following the onset of the Russia-Ukraine conflict in February 2022, there was a significant influx of migrants from both nations to Antalya, İstanbul and Mersin,” said Yapan, adding that these three locations became the most popular among Russian investors where their presence pushed prices up.
In Antalya alone, prices jumped 230% in one year by the second half of 2022.
“Due to the doubling of the foreign population in Antalya over the course of two years following the migration from Russia and Ukraine, property and rental prices skyrocketed,” said Yapan.
Meanwhile, the devaluation of the Turkish lira limited Turkish buyers’ opportunities. At the same time, a large number of Russian and Ukrainian citizens paid huge amounts in cash, triggering property demand that further provoked the increase in prices.
However, demand from Russian buyers didn’t explain the major change in prices in the entire country, even if their significant interest in certain locations did drive prices up.
“However, in 2023, out of 1.2 million houses sold in Turkey, 35,000 houses (3%) were sold to foreigners, and roughly 30% of these houses sold to foreigners were sold to Russians,” said Yapan, adding that Russian investors recently started swapping Turkey for other destinations, such as Cyprus.
Investing in the Turkish property market – is it too late?
The Turkish market has slammed on the brakes as a result of high housing and rental prices, high interest rates and declining household income in real terms due to high inflation.
House prices are still increasing in nominal terms, but they are falling behind inflation. Therefore in real terms, they’ve been getting cheaper lately.
High construction costs may lead to limited supply. However, if demand for homes increases and interest rates drop to stimulate growth, it could help overcome the current stagnation.
However, people cannot afford to buy their house at the moment, leading to stubbornly high rental prices – and this is actually leaving some room to invest for cash buyers.
“There is a ratio, for instance, in Istanbul or in Turkey,” explained Yapan. “Most of the time the sale price of a house was 300 times the rent. It’s an average. But now the rents are very high.”
“The rent increase is more than the house price increase,” he said. “So now this average drops between 250-300.”
In theory, this means that, in fewer than 300 months, investors can recoup the price of a house.
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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.
Although the housing market traditionally thaws every spring, aspiring homebuyers may want to consider an extended hibernation given what is an exceptionally tough market this year.
Home prices last year rose an average of 6.7% in the country’s 20 biggest metro areas, according to the latest S&P CoreLogic Case-Shiller data. Across the nation as a whole, housing prices rose than 5% over the last year. Driving the increase are higher mortgage rates, which makes homeowners reluctant to sell their properties given the elevated costs of finding a new place, coupled with a dearth of homes on the market.
“It’s just a sort of toxic brew that means that people are not willing to sell houses, and the people who are actually looking for them don’t have a lot of stock, or don’t have a lot of affordable options,” said Javier E. David, managing editor for business and markets at Axios, told CBS News.
The average rate on a 30-year mortgage is now 6.90%, up from 6.77% last week, mortgage buyer Freddie Mac said Thursday. The difficult conditions have cast a distinct chill on the market — only 4.8 million homes changed hands in 2023, the lowest level since 2011, according to the mortgage lender. Freddie Mac expects home prices to rise 2.6% this year and 2.1% in 2025.
“While the S&P CoreLogic Case-Shiller Index continues to show home price resiliency against surging borrowing costs, it also highlights continued headwinds for the housing market, namely elevated mortgage rates and a severe lack of existing homes for sale,” CoreLogic Chief Economist Selma Hepp said in a report. “And as mortgage rates continue to hover in the 7% range, it will be difficult to convince existing homeowners to move at the current time.”
Meanwhile, stubbornly high inflation has dashed hopes of the Federal Reserve cutting interest rates before the spring homebuying season begins.
“We’re in a different place now than we were even a month ago,” David said. “I think markets were expecting the Federal Reserve to start cutting rates sometime in the first half. We’ve had a run of unexpectedly hot inflation data — that means the Fed is not necessarily going to hike rates again, but they’re not in a rush to cut. So all of the hopes and dreams that we had built around this idea that the Federal Reserve was going to be giving us easier policy, the timetable is being pushed back a little bit.”
—The Associated Press contributed to the report.