Turkish Residential Real Estate Market in 2026: Deferred Demand, High Rents, and Real Price Declines

At the beginning of 2026, Turkey's housing market remained an arena of contradictory trends. On one hand, deferred demand, high rental rates, and a slight easing of lending conditions supported local buyer activity. On the other hand, rapid nominal price growth was completely offset by inflation, meaning that in real terms, housing in the country continued to become cheaper.

According to the Central Bank of the Republic of Turkey, the Residential Property Price Index rose by 26.36% year-on-year in February 2026. However, after adjusting for inflation, this translated into a decline of 3.93%. The same picture was observed in the three largest cities. In Ankara, nominal growth was 29.69%, with a real decline of 1.40%. In Istanbul, the index rose by 27.99%, but after inflation, prices fell by 2.69%. In Izmir, nominal growth of 25.82% resulted in a real decline of 4.34%.

In the fourth quarter of 2025, the national average housing price per square meter reached 45,447 Turkish lira, approximately equivalent to $1,076. This is 26.03% higher than a year earlier. Istanbul remained the most expensive major market at 74,101 lira ($1,755) per square meter. Ankara recorded the fastest annual growth among major cities at plus 38.69%. Muğla also stood out, with an average price of 76,619 lira ($1,815) per square meter, significantly above the national average and highlighting the persistent premium for high-end coastal locations.

Regarding forecasts, professional market participants and households still expect further nominal price growth, albeit more moderate. In the second half of 2025, 72% of developers and investors predicted price increases over the next six months, while the remaining 28% expected stabilization. No one anticipated a decline. Household surveys show that in February 2026, people expected housing prices to rise by 35.4% over the next 12 months — slightly less than in January (39.2%). Experts, particularly Professor Ali Hepşen, believe that a gradual easing of interest rates will not cause a sharp price jump but could stop the real decline and initiate a recovery in some segments.

Historical Context: From Boom to Volatility

From the mid-2000s to 2017, the Turkish housing market experienced a prolonged upswing driven by rapid urbanization, large-scale construction, and strong domestic demand. Then, starting in 2018, the market fell under the sway of macroeconomic turbulence: a sharp depreciation of the lira, an economic slowdown, and subsequently very high consumer inflation led to strong nominal price fluctuations, while real growth often turned negative. In 2020–2022, property increasingly served as a hedge against inflation, supporting demand, although the regional picture was uneven.

The February 2023 earthquakes were a major shock. Emergency recovery programs and large-scale social housing projects accelerated construction in the affected provinces and intensified regional differentiation. Transaction volumes in 2023–2024 were volatile: total sales fell, mortgage transactions contracted during periods of tight credit policy, and foreign demand, important for coastal and large cities, peaked in 2022 and then declined sharply due to stricter conditions for obtaining residency and citizenship through investment.

By 2025, the market showed clearer recovery in activity, although real prices were still declining slightly. Demand strengthened, but widespread real growth in housing values did not occur.

Demand: Domestic Driver Amid Foreign Purchase Decline

In 2025, housing sales in Turkey remained resilient, with domestic rather than foreign demand driving the recovery. A total of 1,760,292 homes were sold nationwide, 13.58% more than the previous year. Secondary market sales accounted for 68% of all transactions and grew by 15.24%, while primary sales increased more modestly by 10.28%. The growth was broad-based but skewed toward existing inventory, which is immediately available and offers more room for negotiation.

The Real Estate Investors Association links the rebound to expectations of lower interest rates, housing's role as a store of value, some improvement in access to finance, and internal migration following the earthquakes. However, it is emphasized that homeownership remains difficult for middle-income families, so the increase in transactions does not mean a restoration of affordability.

Market participants cite a complex set of reasons: deferred demand, post-earthquake mobility, and very high rental rates pushing tenants toward purchases. At the beginning of 2026, demand moved into a more stable phase. In January–February, 236,029 units were sold — just 0.60% more than a year earlier. This is not a deterioration but normalization after a very strong 2025. February sales still rose by 5.9% (to 124,549 units), so buyer interest remains, but the market is no longer accelerating.

At the same time, foreign purchases continued to decline: in 2025, there were 22,980 — down 10.50% from the previous year — and their share of total transactions fell to 1.3% (compared to 1.7% in 2024 and 4.4% at the peak in 2022). Russians remained the largest group of foreign buyers, followed by Iranians, Ukrainians, Germans, and Iraqis. Experts attribute the decline to rapid price growth and slower residence-permit procedures. Foreign demand has become narrower, more selective, and much less significant to national market dynamics than at its peak.

Regionally, Istanbul leads with an 18% share of all sales and growth of 16.51%. The four main markets — Istanbul, Ankara, Izmir, and Antalya — together accounted for 37% of transactions with growth of 15.47%. For foreigners, Istanbul, Antalya, and Mersin remain the most attractive destinations.

Looking ahead, demand is expected to remain resilient but calmer and more selective. Experts call 2025 not an endpoint but a transition point. High rents, deferred demand, replacement needs, and Turks' habit of viewing property as a store of value will support activity, although affordability problems will inevitably make the recovery uneven.

Supply: Permits Soar, But Completed Housing Arrives Gradually

Housing construction in Turkey strengthened noticeably in 2025. Permits were issued for 1,109,424 units — 30.25% more than in 2024, the highest since 2017. The vast majority (95%) were for multi-dwelling buildings, with only 5% for single-family homes. The Investors Association links the permit surge to expectations of stronger demand after several weak years, accelerated construction for earthquake victims, and ongoing urban transformation. In the 11 earthquake-affected provinces, 308,628 units received permits — almost 28% of the national total.

However, permits are not yet finished housing. In 2025, occupancy permits were issued for 671,553 dwellings — just 5.89% more than the previous year. The pipeline is being replenished, but the flow to completed projects is gradual. Construction costs remain high: the construction cost index rose by 24.5% year-on-year in December 2025, putting pressure on project economics.

Against this backdrop, housing affordability is receiving increasing attention. Industry associations acknowledge that supply growth alone is insufficient — measures to improve affordability, expand access to finance, and lower land costs are needed. In response, the government is preparing an unprecedented social housing program of 500,000 units across all 81 provinces. Additionally, a rental social housing program will be launched for the first time to curb soaring rents in Istanbul. The first units are planned for delivery only from March 2027, so the market will not feel immediate relief, but these initiatives should expand access and ease price pressure in the long term.

Rentals: Inflation Slowing But Still High

Rental inflation, which reached record levels due to macroeconomic imbalances, increased foreign demand, and the earthquake's aftermath, is gradually slowing but still outpaces both overall inflation and home price growth. In February 2026, actual rents rose by 53.9% year-on-year. This is a notable decline from 78.9% in July 2025 and 97.2% in February 2025. Overall inflation in the same February was 31.5%.

The Central Bank has developed a special New Tenant Rent Index. Over the twelve months to February 2026, it rose by 34.2% nationwide — compared to 49.1% in July 2025 and 53.9% a year earlier. The strongest annual growth in new tenant rents was recorded in Istanbul (41.0%), the weakest in the provinces of Hatay, Kahramanmaraş, and Osmaniye (20.0%). The Central Bank notes that with monetary policy tightening, the index's annual growth rates have been declining since Q4 2023, and as of January 2026, they have fallen below 40% both nationwide and across the three largest provinces.

Some analysts are already talking about a cooling rental market. Landlords, fearing losing reliable tenants or facing long vacancies, prefer minimal increases or rate freezes. In Q4 2025, the average rent nationwide was 224.8 lira ($5.3) per square meter. The most expensive rental market is Istanbul, followed by Muğla, Izmir, Çanakkale, and Antalya.

Gross rental yields, according to Global Property Guide, averaged 7.32% in February 2026 (down from 7.76% in August 2025). The highest potential yields were shown by Istanbul (8.17%) and Ankara (8.10%), the lowest by Antalya (6.14%).

Mortgage Market: Rates Ease Slightly, Lending Revives

After a temporary tightening in Q2 2025, the Central Bank of Turkey continued to cautiously ease policy in the second half of the year, bringing the 1-Week Repo Rate to its current 37%. At its March 2026 meeting, the regulator paused due to increased uncertainty around geopolitics and energy prices. Experts expect further rate cuts this year, but the pace is likely to be slower.

The average interest rate on new housing loans fell from 42.6% in July 2025 to 36.2% in January 2026. Nevertheless, it remains extremely high compared to pre-crisis levels. The average rate on outstanding housing loans, conversely, rose to 31.0%.

Against this backdrop, mortgage sales returned to growth after several years of decline. In 2025, just over 248,000 mortgage transactions were registered — 48.8% more than in 2024. The trend continued into early 2026: in January–February, 45,300 such transactions took place, 29% more than a year earlier. However, overall credit activity remains subdued. The share of mortgage sales in total transactions reached only 14.1% in 2025 — higher than 10.8% in 2024 but well below the 2015–2020 annual average of 30.5%.

The nominal size of the housing credit market continues to grow rapidly: over the last five years, the average annual growth rate was 19.8%. At the end of 2025, the total banking sector portfolio reached 678.3 billion lira ($17.2 billion). However, in relative terms, the market remains small, especially compared to countries with developed mortgage systems. The mortgage-to-GDP ratio fell from 6.2% in 2016 to 1.1% in 2025.

Economic and Social Factors: Geopolitical Shock and Fragile Stabilization

Turkey is in the midst of macroeconomic stabilization after a period of expansionary policies that stimulated demand but created imbalances — a surge in inflation, a widening current account deficit, and a depreciation of the lira. Real GDP growth accelerated from 3.3% in 2024 to 3.6% in 2025, and the IMF forecasts 4.2% in 2026 and 4.1% in 2027.

Inflation is gradually declining from a peak of 72.3% in 2022 to 34.9% in 2025 and 31.5% in February 2026. Average annual inflation is expected to be 24.7% in 2026 and 19.5% in 2027. However, these forecasts do not account for the latest shock from the Middle East conflict, which, according to experts, increases near-term risks. A prolonged conflict threatens a new wave of inflation, a widening current account deficit, and slower growth due to expensive energy and regional instability.

The labor market shows surprising resilience: formal sector employment is at historical highs, and unemployment is relatively low at 8.1% seasonally adjusted in January 2026. However, the broader measure of labor underutilization (including time-related underemployment, potential labor force, and unemployment) remained high at 29.9%. The OECD notes that increasing labor force participation is critical for Turkey's future development, as the "demographic dividend" is gradually diminishing.

Overall, high inflation makes the economy very vulnerable. The IMF warns that "a soft landing might be difficult to achieve." The World Bank sees risks to the forecast as skewed to the downside: premature policy easing could trigger a flight to foreign currency, while delays in fiscal consolidation and slow progress on reforms could hinder disinflation.

In January 2026, Fitch Ratings affirmed Turkey's rating at 'BB-', revising the outlook from stable to positive due to faster-than-expected growth in foreign exchange reserves.