The latest on construction costs, house prices and house sales in Türkiye
In April 2023, general construction costs increased by 1 percent on a monthly basis and 53 percent on an annual basis. Construction material prices increased by 39.8 percent year-on-year, while labor costs rose by 102.7 percent due to the minimum wage increases in July 2022 and January 2023. As of April 2023, the annual average increase was 88.4 percent in general construction costs, 88.7 percent in material prices and 87.5 percent in labor costs.
In April 2023, the annual increase in construction costs for residential buildings was 55.49 percent, while the annual increase in new house prices was 122.77 percent. Having accelerated in 2020, the rise in new house prices accelerated further in 2021 and 2022. In addition to the rise in construction costs, new house prices also increased as a result of the rise in demand for investment housing due to foreign house purchases and negative real interest rates.
New house prices rose by 32.1 percent in the January-April 2023 period. Meanwhile, construction costs for residential buildings rose by 22.2 percent in this period. Due to the internal migration caused by the earthquake disaster in February, house prices in some provinces rose excessively. In real terms, new house prices rose by 55% yoy in April.
Starting in September 2021, the CBRT's policy rate cut process did not affect housing loan rates much, but led to a decline in deposit rates and an increase in exchange rates. In this environment, house prices rose, while house sales increased by 45.3% in the September-December 2021 period. The rapid depreciation of the Turkish lira led to an increase in construction costs and house sales to foreigners, while negative real interest rates increased the demand for investment housing purchases and pushed up house prices. House sales, which rose by 31.4 percent in the first half of 2022, were adversely affected in the second half of the year and declined by 19.1 percent due to the continued rise in house prices. The decline in house sales continued in the January-May period of 2023 as well. In this period, mortgaged sales dropped by 16.7 percent, first-hand sales by 11.3 percent and total sales by 16.3 percent.