Turkey is preparing to temporarily impose an upper limit on annual increases in home rentals, the country’s justice minister said Wednesday, in a move that comes amid soaring inflation.
The arrangement comes after soaring prices and rents triggered alarms and the government pledged to act, as residents struggle to find affordable homes to rent or buy.
The new regulation will cap the annual hikes in rents at 25%, Justice Minister Bekir Bozdağ said. “It will be possible to increase housing rents for a year in such a way that they do not exceed 25% of the previous year’s rental price,” the minister said.
Officials would include a new clause in the code of obligations stipulating the change, which could be applied as soon as July and would run for a year, Bozdağ said.
Under current law, once-a-year price hikes for existing tenants are capped at the average annual rate of inflation over the past 12 months.
That level reached 39.3% in May. Fueled by soaring food and energy prices, Turkey’s annual inflation rate rose at a lower-than-expected pace last month but still jumped to a 24-year high of 73.5%.
The regulation is said to aim at limiting the further impact of rent increases on inflation in the coming months. Rent, along with petrol vehicles and cigarettes, has the heaviest weighting in the official inflation basket.
Turkey’s residential property price index (RPPI), measuring the quality-adjusted price changes of homes, surged an annual 110% in March in nominal terms, official data showed.
The index leaped an annual 96.4% in February. The increase had stood at 77.5% in January and 59.7% in December. Almost a year ago, the index’s annual rise was 32%.
The construction index has soared 102% year-over-year in March, according to data from the Turkish Statistical Institute (TurkStat).
House sales in Turkey rose nearly 40% year-over-year in April to 133,058 units, despite high borrowing costs and soaring prices, as households continue to view real estate as an attractive investment tool to shield themselves from inflation.
Sales from January through April were up 26.2% to 453,121 houses.
