Promoting Housing Market Policy
The incentive to attain Turkish citizenship provided by the Turkish government for foreigners to purchase a real estate including a house, a piece of land, or a production plant costing at least $250k in the recent years is a part of the political preference to attract investors’ attention to Turkey. However, this policy has caused an unexpected result for Turkish people: high inflation in the Turkish housing market. The Turkish government has literally invited Arabs and Russian people to purchase houses in Turkiye. The coronavirus pandemic and the invasion of Ukraine by Russia has created an environment for these people to move to Turkey, and being able to attain Turkish citizenship has been a big favor for them. A three-plus-one house was sold around 500k TL just two years ago while it costs an amount close to 3 million TL in Istanbul. In the central neighborhoods in Istanbul, even small houses cost more 5 million TL. With a price to be paid in the central Istanbul, one person can purchase a decent house in Berlin, Paris, or any other European capital other than London. Considering that Turkiye is not doing background check for international money transfers, purchasing a real estate in Turkiye, getting Turkish citizenship, and easily moving to Turkiye has been an important option for some groups involved in illegal activities. In other words, purchasing a real estate in Turkiye is used for money laundering.
Success or Failure
According to the Turkish government, the high inflation in the Turkish housing market is a sign of a developing country, and even some politicians claim that similar inflation is experienced in the developed countries. Also, the real estate market caused a large capital inflow into the country. However, there is a drama behind this story. Turkish people’s average income is close to the legal minimum wage in the country. A person who earns minimum wage, 5.5k TL, cannot afford even one room house in Istanbul. There is a similar situation for other cities because a large number of Russians and Syrians prefer living in many other cities other than Istanbul. It is true that Turkiye is still receiving capital inflow thanks to the houses purchased by foreigners. In the last six months, Turkiye received a capital inflow of $45 billion and it helped the Central Bank of Turkiye to power Turkish Lira against the foreign currencies. Although there is a high level of income inequality in Turkiye, the large capital inflow seems like a clue to solve the economic crisis in Turkiye.
Possibilities
If the capital received from the international investors can be distributed to the more productive industries using high technology, it might be a good solution for Turkiye. However, there is a large number of political risks waiting for Turkiye. Most of the capital inflow seems like coming from Russians running away from the war in Ukraine, and illegal activities. That means NATO and EU might implement sanctions on Turkiye. The political news about these two subjects indicates that there is a bargaining continuing between Turkiye and some other countries. Secondly, Turkiye has received a large number of foreign investments from 2002 to 2013 while FED implemented expansionary economic policies to stimulate the American economy, and the political preferences of the Turkish government could not distribute this large amount of financial resources to the productive industries using high technology. Instead, these financial resources were spent on large construction projects including high-ways, airports, and stadiums. Consequently, the previous experience shows that Turkiye does have a good memory of using large financial resources and create an economic development for everybody. The political decisions Turkish people will make by voting in the elections in 2023 will determine how Turkiye will develop.
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