The end of the year is a time when everyone takes stock. And although the current information does not cover the whole year, but only the period January-October, we can already see how dynamically Turkey, the real estate industry and related sectors of the economy are developing.

So, today we will look at the dynamics of the tourism market, as well as its impact on the rental industry. Spoiler: if you were planning to buy a home for earnings on rent, then before the New Year is the best time for this.

The tourist flow in Turkey turned out to be a record in the Mediterranean

Due to the coronavirus and widespread lockouts that closed almost the whole world to the public, the flow of tourists across the planet in 2021 was unstable. This was the case everywhere, but not in Turkey, which simplified entry procedures as much as possible, so that everyone had access to luxurious beaches and quality recreation.

This is reflected, in particular, in the dynamics of air transportation, which was recently distributed by the General Directorate of State Airports (DHMİ) under the Ministry of Transport and Infrastructure of Turkey. According to their data, passenger traffic at the country’s airports for the period January-October of this year amounted to an incredible 107,104,471 people. This figure is already impressive, but against the backdrop of the corona crisis, it looks even more spectacular.

In just one month (October), 158,512 flights were made. Of these, 58,953 were international, carrying 8,595,156 passengers. In total, taking into account domestic flights, 15,713,406 passengers were transported, which is a lot, given the time of year. Most often, foreigners visited Istanbul and Antalya.

In this context, the data of the Association of Hoteliers of the Mediterranean Region (AKTOB) on the dynamics of the tourist flow in Antalya, which also appeared in November, are interesting – they are cited by the authoritative Anadolu news agency.

According to their data, in January-October, the “Pearl of the South” was visited by 8 million 616 thousand tourists. The closest competitor in the Mediterranean was the Spanish Mallorca, although its figure was more than two times less – only 3.5 million people. According to the forecast of the head of the association, Erkan Yagci, by the end of 2021, tourist traffic to Antalya will significantly exceed the mark of 9 million people.

The most active visitors to Antalya were Russians, Ukrainians, Germans, Poles, Kazakhstanis, Romanians, Dutch and British. In total, the city was visited by tourists from 60 countries of the world, and most of them repeatedly.

They rested mainly in hotels, but the demand for rental housing is also constantly growing, because it is becoming more and more difficult for hotels to cope with such a tourist flow – they are designed for the simultaneous reception of only 680 thousand people. This is taking into account both the cheapest and the most expensive rooms.

Hoteliers are convinced that such success is due to the “Safe Tourism” certification program, which has been introduced in Antalya since this year and intends to repeat it in 2022. This approach combines reliable control and safety in a pandemic, but at the same time does not become burdensome for vacationers.

It should be noted that a similar situation is observed in other tourist locations in Turkey, primarily in Istanbul, a little less noticeable in Alanya. The growth of tourist traffic against the backdrop of the devaluation of the Turkish lira has made holidays in Turkey extremely attractive for millions of people and has led to interesting consequences in the real estate market – which we will discuss in the next block.

Rental housing as a response to the growth of tourist flow

Such a rapid growth of tourist traffic to Antalya and other Turkish cities provoked a real stir not only for the best hotel rooms, but also for rental housing, the rates for which began to grow at an unprecedented pace.

If this news cannot be called good for tenants, then for property owners it is quite the opposite – thanks to the increase in rates, the payback period for investments in Turkish real estate has noticeably decreased. If earlier the average age of return on capital was up to 25 years, now it has dropped to 20, and in some locations even to an incredible 13 years (and you can still earn money on the resale of real estate). However, first things first.

Due to unprecedented traffic, rents have increased by an average of 40% nationwide since the beginning of the year. However, I was surprised by the data from Istanbul, Antalya, Ankara and other cities with the most noticeable passenger traffic. In the locations most popular with tourists, the annual increase in rental rates was 100%, 200% and even 300% (a record in Istanbul). Moreover, analysts call foreigners the main “culprits” of such a hype.

Among the unpleasant “side effects” was the fact that tenants began to move in other people without notifying the homeowner. This is especially abused by students. It should be noted that in Turkey it is forbidden to settle someone without notifying the homeowner, otherwise he may go to court.

Another result was that the demand for two- and three-room apartments increased sharply against the backdrop of cooling interest in one-room apartments. The fact is that many tenants calculate the situation with expensive rent in advance and cooperate before settling in order to save money and at the same time not break the law. Two-room apartments are now increasingly inhabited by three, and three-room apartments by five people at once.

Rising winter rates and other sudden trends

Another equally significant trend was the growth of rental rates for the winter. Since the high tourist season in Turkey ends in October, the period from November to February was usually “dead”, with very low activity of holidaymakers. However, this was the case before – now the demand for housing in winter remains high, and rental rates continue to rise even in cold weather.

Thus, the highest growth rates this fall were recorded in Istanbul – rates increased by 8.4% in October alone – and in Izmir (+6.8% compared to September). The Turkish Statistical Institute (TÜİK) completes the picture, disseminating data on long-term contracts that differ from short-term and national averages. According to this information, the November increase in rates in this segment exceeded 17%.

It should be clarified here that rates on long-term rental agreements can be reviewed only once a year. Therefore, the dynamics here is noticeably lower than in the segment of short-term contracts. Nevertheless, even here growth is noticeable: in July + 14.55%, in October + 16.42%, in November + 17.09%. At the same time, the overall consumer price index is growing: in November it increased by 2.39%, and since the beginning of the year – by 19.89%. So, most likely, the growth of rental rates will continue in December.

There is another trend of recent months, directly related to inflation, but so far little discussed by a wide audience – the costs of construction companies for materials and workers’ salaries have increased by more than 40% since the beginning of the year. At least, this was announced by the relevant associations in November.

As a result, in October-November, companies began to invest less in new facilities, which may manifest itself at the beginning of next year, provoking at some point a decrease in supply on the market. And all this against the backdrop of growing demand. Consequently, the growth rate of prices for Turkish real estate next year may be even higher than this year.

The market works in favor of landlords and investors

If for a long time in Turkey there was a relatively low cost of renting housing, which was due to the large supply on the market and pronounced seasonality, then in 2021 the trend changed. And with a huge margin in favor of landlords, whose investments are now returned much faster.

Based on the data for the end of October and the beginning of November, the average payback period for real estate through rental in Turkey was 20 years. Bursa turned out to be the most profitable, where this figure decreased from 22.1 to 18 years in just a month. Next comes Ankara – 21.4 and 20 years, respectively. Antalya closes the TOP-3, where the return on investment from rent has been reduced from 21.4 to 20 years. For comparison, in Istanbul, the same indicator changed from 23.8 to 21.1. That is, in the same Antalya, it is a little easier to return investments.

This indicator is rather arbitrary, because it is determined by simply dividing the average cost of housing by the average annual rental rate. Thus, the average cost of housing in the country is about 500,000 liras, and the average rental rate for long-term contracts is about 2,000 liras. Consequently, the payback period will be 20.8 years, which we wrote about at the beginning of the information block.

However, the actual payback period depends on many factors, including the characteristics of the location itself (proximity to the sea, infrastructure development, etc.), as well as market factors, inflation, lockdown risks, and much more. At the same time, we previously wrote that in the most popular tourist locations, rental rates increased by 100-300% over the year.

Thus, the return on investment will be several times less than the national average. According to analysts, in seaside tourist areas, the average payback period of real estate is 13 years, not 20.

Realizing this, people are in a hurry to buy housing, until, on the one hand, prices for it have risen even more, and on the other, while rental prices are breaking all records. This is confirmed not only by the number of transactions, which we have repeatedly written about, but also by the demand for mortgages, which grew in August-October, despite the increase in interest rates.

What’s next: we expect new price records

As you can see, everything in the economy is interconnected – passenger traffic affects the number of visitors who form the demand for hotel rooms and rental housing, and this, in turn, affects the real estate market. And the exchange rate and inflation affect everything at once.

At the end of the year, the International Monetary Fund (IMF) predicts the growth of the Turkish economy by 9%. This forecast is similar to the government’s expectations. Experts believe that the devaluation of the national currency, after the initial shock, will have a beneficial effect on the country’s economy. Simply because Turkish goods, as well as real estate, will become more affordable for foreigners. Thanks to this, demand and, accordingly, profitability for investors will increase.

Time will tell whether such expectations of analysts will come true, but the fact that they all unanimously predict an increase in housing prices and rental rates in itself speaks volumes. The tourist flow will also grow – and even in winter (compared to last winter, of course), which means that the demand for housing will definitely not fall.

Another thing, if the supply from developers who reduce their activity decreases, then it will be much more difficult to purchase quality housing in a good area than it is now. However, demand shapes supply and you will definitely not be left without housing – especially if you contact Expert Property. Our real estate price aggregator has very flexible settings and is easy to use, but it is extremely effective in choosing the best properties on the Turkish market.

Thus, we can conclude that Turkey is becoming more and more popular among foreigners every month

yours, Tatyana Gunesh