Turkey set to temporarily cap annual housing rent increases

Turkey is preparing to temporarily impose an upper limit on annual rent increases, the country’s justice minister said on Wednesday, in a move that comes amid soaring inflation.

The arrangement comes after soaring prices and rents sparked alarms and the government pledged to act, as residents struggle to find affordable homes to rent or buy.

The new regulation will cap annual rent increases at 25%, Justice Minister Bekir Bozdağ said. “It will be possible to increase housing rents for a year so that they do not exceed 25% of the rental price of the previous year,” the minister said.

Officials would include a new clause in the code of obligations stipulating the change, which could be implemented as early as July and would last for a year, Bozdağ said.

Under current law, annual price increases for existing tenants are capped at the average annual inflation rate for the past 12 months.

This level reached 39.3% in May. Fueled by soaring food and energy prices, Turkey’s annual inflation rate rose at a slower pace than expected last month, but still peaked at 73.5% in 24 years.

The settlement would aim to limit the further impact of rent increases on inflation in the coming months. Rents, along with gas-powered vehicles and cigarettes, have the heaviest weight in the official inflation basket.

Turkey’s Residential Property Price Index (RPPI), measuring changes in quality-adjusted house prices, jumped 110% annually in March in nominal terms, official data showed.

The index made an annual jump of 96.4% in February. The increase was 77.5% in January and 59.7% in December. Almost a year ago, the index’s annual increase was 32%.

The construction index climbed 102% year-on-year in March, according to data from the Turkish Statistical Institute (TurkStat).

Home sales in Turkey rose nearly 40% year-on-year in April to 133,058 units, despite high borrowing costs and soaring prices as households continue to consider real estate as an attractive investment tool to hedge against inflation.

January-April sales rose 26.2% to 453,121 homes.

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Sharon P. Juarez