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Why are Residential Property Prices High?

Why are Property Prices High
Nova Property

The Central Bank, which has published its study on the increase being experienced in the prices of residential property, has put the emphasis on quality. Where the quality is improving, the prices are also rising at the same rate. Istanbul has been revealed as the main reason for property prices having increased by more than 95 percent in the last 5 years. The most frequently asked questions in the study were ‘Why are properties so expensive?’ and ‘What affects property prices the most?’ The study has provided the answers to these questions.

The Central Bank, which has researched the reasons for the increase in property prices, has reached the conclusion that quality plays an important role in prices. According to the study, half of the 95.3 percent increase in property prices in Istanbul in the last 5 years was caused by quality.

Property prices in Istanbul

The Central Bank has conducted a study based on the nominal increase in residential property prices of more than 50 percent in Turkey, between the years 2010-2014 and the fact that this increase reached double that amount in certain regions. This study will also bring a different perspective to those who are to become homeowners within the sector. It was revealed that property prices increased by 95,3 percent in Istanbul, 63,6 percent in Izmir and 53,2 percent in Ankara, in the last 5 years. It was stated in the study that the dynamics of the property market need to be monitored carefully due to the increases which have been experienced in the recent years. The study also underlined that attempts had been made to measure the impact of quality and to produce a price index where this impact has been removed. According to the analysis carried out on Istanbul Küçükçekmece, it was emphasized that quality had the effect of increasing property prices.

Prices changed after 2012

It is emphasized in the study that the hedonic property prices tendency in Istanbul, Ankara and Izmir had continued until the beginning of 2012, but that from the middle of that year, this tendency had changed. The study pointed out that property prices in Istanbul rose more under the hedonic prices, and made the following determinations: “The highest rate of increase in residential property prices in the last five years was recorded in Istanbul, with 95,3 percent. This was followed by Izmir with 63,6 percent and Ankara with 53,2 percent. This sequence is also similar to the rates of increase on the KFE (Property Price Index), which was the official index during that period (116,7 percent for Istanbul, 72,5 percent for Izmir and 57,2 percent for Ankara). As can be seen, the lowest increase in quality among the three big cities was recorded in Ankara with 4.0 points (less than 1 tenth of the total change). On the other hand, the increase in quality within the rise in average property prices in Istanbul was 24.1 points (almost 1 fifth of the total change.”

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