Last year, the exchange rate of the Turkish lira collapsed from 8 to 15 units per 1 US dollar. Now the situation has stabilized around the mark of 14 lira per 1 dollar. Enough time has already passed to analyze the reaction of the real estate market and, most importantly, to make a forecast for the future – what will be the situation with exchange rates and housing prices until 2025.

The real estate market and the currency market are two sides of the same coin

In the first quarter of 2022, the lira exchange rate against the US dollar is quite stable, and a slight dip from 13 to 14 lira per 1 dollar is not a fall in the Turkish currency, but a strengthening of the dollar itself against the backdrop of Washington’s tighter monetary policy. We see that instability has left the Turkish financial market without causing significant damage to the economy – the crisis did not happen.

I am sure the dollar will not take such new heights in the coming months, because there is no reason to do so. But the way the real estate market has adapted to the new conditions allows us to make predictions for the near future. Although in our time this is a very thankless task.

Let me remind you that both the primary and secondary markets in the country work with the lira, although all prices are pegged to the dollar and the euro. The market immediately reacted to the change in the exchange rate during the period of the greatest failure. Many then suspended all sales until the currency shock passed.

Others increased prices by about 25%, thus maintaining the peg to the dollar. This happened when the government fixed the exchange rate at 12.13 per 1 dollar. It took the market two months to overcome the currency shock – in February, everyone introduced new prices and transactions intensified.

It should be noted that this trend towards the depreciation of currencies is global and no longer new. We talked about the same thing and about the rise in real estate prices in Turkey last year. It applies not only to Turkey, but also to all neighboring states, including post-Soviet ones. Various political crises only accelerate it.

What about the rest of the assets?

The same applies to all other financial and generally intangible assets that are traded on exchanges – look at stocks, commodity futures and other securities. Even in “developed” countries, stock indices are falling. Take a look at the shares of Apple or Amazon, their dynamics are negative. But these are top technology companies, remote from both Turkey and the CIS.

Oil and other commodity quotes – they are also losing in price after winter peaks. If even they fall, despite the growing demand, then this is already such a “cascade effect” – one catches the other, covering all financial markets of the world and most clearly manifesting itself on intangible assets (currency, stocks).

Among the reasons for this is both political instability and the confrontation between “developed” and “developing” economies. The same United States conducts its monetary policy in such a way as to slow down the growth of developing countries – including Turkey, whose positive dynamics were previously one of the most impressive.

Turkey has a dynamic market economy, which provides many advantages for doing business. But the downside was that such an economy reacts more quickly to financial manipulation, which resulted in the failure of the lira.

Therefore, we had a currency crisis earlier than other developing countries – in 2021, and not in 2022 like the rest. On the other hand, the country is better prepared for possible instability than others and feels quite confident against the backdrop of modern challenges.

Yes, the Central Bank of Turkey could continue to hold the exchange rate then, spending its reserves. But the authorities decided not to do this. They deliberately let the course float almost freely. We will not evaluate this decision, just note that it was a conscious decision. Perhaps to support exports and maintain a dynamic free market in the country.

In this case, it is important that the rest of the currencies of all countries, I am sure, will continue to sink against the dollar during the year. Even in China, the yuan is likely to show a noticeable drop.

What to invest in so as not to lose it during a crisis

During any economic crisis, banks and savings in them are the first to suffer. Deposit rates are falling, no one needs loans… On the contrary, people begin to withdraw from accounts and withdraw even the money that was stored there in cells. Everyone withdraws capital into something more reliable and material.

Most often in the CIS, dollars, gold and real estate are chosen as a “safety cushion”. But the US currency also draws down over time. In addition, they need to be stored somewhere – will you keep them under your pillow? And if you put them in a safe deposit box, then you will still remain dependent – if the bank “bursts”, then you will not return your money.

It’s the same story with gold, but it’s even more difficult to store than paper money, and most importantly, it’s harder to sell. Moreover, the difference between the sale and purchase prices here will be very large – you will simply go into losses.

Gold will never depreciate to zero, so it is taken in the long term, as an “emergency reserve”. However, you can’t buy anything for it so easily and you won’t get income from it quickly.

Real estate is a completely different matter: brick walls are more reliable than paper. The demand for housing and land is growing rapidly in our time. Because the value of real estate only increases against the background of the depreciation of money and shares. Housing and land have reliable liquidity and will not be lost, even if your money in bank accounts is reset to zero.

Why is housing liquidity growing?

Because we cannot produce land – the population is growing, and vacant land plots are decreasing. Especially when it comes to the most sought-after locations by the sea. Hence the rise in land and housing prices, as Without vacant plots, there will simply be nowhere to build it.

One thing catches the other – by investing in housing, you not only save capital, but you can increase it. Because foreigners from developing countries or even the EU will definitely want to buy it from you or rent it for a while. Simply because for residents of rich countries, living in Turkey is a penny after the collapse of the lira, and they will not mind investing their money either.

Another category of people who will gladly buy housing from you in the Republic of Turkey is residents of the CIS who leave for warm lands for permanent residence or in order to obtain a second citizenship, which opens literally the whole world to its owners – a visa-free or simplified regime to more than a hundred states, including the EU and the USA.

That’s right – a Turkish passport gives much more benefits than a passport of any other coastal country. Turkey has a high level of medicine and comfort, quality education and public services, fresh fruits and vegetables all year round. It is warm even in winter, there is a lot of sun and sea. Plus, you will be gladly accepted by dozens of countries without visas or with a simplified visa regime, and in the USA and Great Britain you will even be allowed to start a business.

Another plus of Turkey is a very easy form of legalization of stay in the country for the whole family: obtaining a residence permit and citizenship, opening and running a business, opening accounts and registering a business. There are many countries in the world where there is sea and sun, but everything is much more complicated with legalization and with doing business by foreigners. And the fastest way to legalize is through the purchase of housing, and therefore the demand for real estate is growing, and its liquidity is growing.

How long will the trend last?

The trend of weakening currencies of developing countries will last at least until 2025, unless there is some new global crisis. This also applies to Turkey. But what will happen later is very difficult to predict today.

Accordingly, all this time, people will actively “ground” their capital in reliable assets, among which housing is out of competition – especially if it is housing in a favorable tourist and business area. And often the tools will be combined – for example, to buy housing for cryptocurrency.

Of course, there is a risk of a correction after 2025, when demand is saturated. It may even shrink slightly after the current peaks, but it will definitely not collapse and will most likely be temporary. Simply because the fundamentals of this growth will not disappear anywhere – the population will grow, and there will be no more free land.

In addition, in the field of real estate, this does not happen that the cost of housing is reset to zero. And in a few more years, demand will resume, but moderately, up to 10-15% per annum, and not as it is now – up to 70% per annum for the most liquid objects in 2021 alone. Such a high rate of price increase cannot be maintained permanently.

You can’t grow indefinitely. It’s just unrealistic. Someday there will definitely be a “ceiling” of demand and I think that this will happen no earlier than 2025. I draw this conclusion based on the current dynamics of not only sales, but also the construction of new facilities, as well as the pace of renovation and allocation of new land plots in Turkey.

As a specialist, I keep track of all this information and therefore offer clients the best options available both in the primary market (including at the stage of excavation) and in the secondary market – the most liquid housing is the best tool to combat the devaluation of any currency.

Real estate in Turkey is not just four walls and a wonderful view from the window. This is access to the widest range of advantages, and most importantly – confidence in the future.