Real Estate to Boom: Falling Interest Rates signal end of ‘Buy Zone’
By: Cameron Deggin
Turkey’s real estate market is at a turning point. Interest rates play a crucial role in shaping the market, as they directly affect borrowing costs. When interest rates are high, mortgage rates rise, reducing affordability and slowing demand. Falling interest rates make borrowing more accessible, increasing property purchases and pushing prices upward.
The Central Bank’s latest decision to lower its key interest rate for the third consecutive month sets the stage for what could be the next big investment cycle.
The ‘Buy Zone’ is still in effect. However, with rates continuing to decline, this period will soon come to an end, leaving buyers with a unique window of time to take advantage of favourable conditions.
Interest rates lowered for third straight month
The Monetary Policy Committee, led by Governor Fatih Karahan, reduced the one-week repo rate from 45% to 42.5%, aligning with market expectations. This follows Turkey’s annual inflation easing to 39% in February, the lowest in 20 months.
The Central Bank’s decision marks a continuation of its strategy to stimulate economic growth while balancing inflation control. It also signals confidence in the country’s ongoing disinflationary trend.
While core inflation remains elevated, the slowing domestic demand and declining inflation expectations provide justification for continued rate cuts. The Central Bank has reiterated its commitment to evaluating monetary policy on a monthly meeting-by-meeting basis, ensuring that decisions align with the latest economic data.
The Borsa Istanbul 100 Index responded to the rate cut with a slight initial dip before recovering, trading 0.4% higher in the afternoon session. Turkish Lira remained relatively stable, sitting at 36.43 per US Dollar.
What does this mean for Turkish real estate?
For Turkish property investors, interest rates are a key driver of affordability and market dynamics. High interest rates over the past year have slowed down the real estate sector, leading to stagnation in property prices and creating an ideal environment for buyers – what we call the ‘Buy Zone.’
Data shows that throughout 2024, $15 billion USD in Foreign Direct Investment entered Turkey. Rather than traditional investments such as real estate, investors deposited into Lira-denominated assets such as bonds, stocks and shares, and savings accounts due to the large interest rates being offered. The investment shift is imminent.
With the latest rate cut, financing property purchases will become more accessible for local buyers, developers, and investors. As borrowing costs decline, demand is expected to rise, gradually pushing property prices upwards. Those who act now will likely secure properties at the lowest possible prices before the market begins its upward trajectory.
The end of the ‘Buy Zone’ is approaching
Turkish citizens make up over 95% of the entire real estate market in Turkey. In 2023, data showed that 1,225,926 properties were sold across the country with foreign buyers accounting for 35,005 transactions, or 3% in total. As inflation stabilises and rates continue to decline, more Turkish buyers will enter the market, leading to increased demand and rising property prices.
Turkey’s real estate market has consistently followed a cyclical pattern, where economic shifts directly impact property prices. Between 2016 and 2019, Turkey experienced a property boom as interest rates were cut, leading to increased affordability and a surge in both domestic and foreign investments. In 2021, following another period of economic tightening, property values appreciated significantly when rates were lowered once again.
Experts anticipate that the next major upswing in Turkey’s real estate market will begin around mid-to-late 2025, with demand set to increase from the first quarter of 2025. Investors who enter the market early stand to see maximum returns by the next peak, projected around 2027-2028, with an estimated average property value increase of 50% in USD terms.
How to capitalise and invest today
Act Fast – The current phase offers a prime entry point for investors before demand picks up and prices rise within the next three months.
Pick of The Best – Investing before the local market comes back ensures the best pick of properties and best bargaining power.
Leverage Market Trends – With interest rates falling, financing options will become more favourable, making it easier to secure prime properties at competitive prices.
Focus on Growth Areas – Affordable city centre Istanbul, Airbnb-approved properties, and markets in Turkey’s Aegean and Mediterranean regions provide strong potential for high returns.
Monitor Central Bank Policies – Future monetary policy decisions will shape market conditions. Continued rate cuts will support real estate growth, but investors should stay informed on economic updates.
- Kartal and Maltepe – On the Asian side, these coastal districts are growing in popularity due to their waterfront developments and improving transport links.
The Turkish coast – Ideal for lifestyle investors looking for second homes, with strong potential for price appreciation in luxury waterfront properties.
- Bodrum – A haven for high-net-worth individuals, with areas like Yalikavak and Turkbuku offering exclusive villa developments and high rental yields during peak seasons.
Turkey’s government has several policies to encourage foreign real estate investment, with the most notable being the Turkish Citizenship by Investment Programme. Foreign investors who purchase real estate worth at least $400,000 are eligible to apply for Turkish citizenship, making the market particularly attractive to non-residents looking for global mobility, tax advantages, and an affordable lifestyle in a rapidly developing country.
Additionally, the Turkish government provides several financial incentives to encourage international buyers and investors:
- VAT Exemptions – Foreign buyers who do not reside in Turkey can benefit from VAT exemptions on their first real estate purchase, significantly reducing costs.
- Rental Income Tax Advantages – Non-residents enjoy lower tax rates on rental income compared to local landlords, making buy-to-let investments highly attractive.
- Residence Permits – Property buyers can apply for long-term residency permits, providing further security and flexibility for those looking to relocate.
- No Wealth Tax – Turkey does not impose wealth tax, and inheritance tax rates are significantly lower compared to many European countries.
Contact us to maximise your investment
Turkey’s latest interest rate cut reinforces the notion that the ‘Buy Zone’ is still open, but not for long. As inflation slows and borrowing becomes more affordable, property demand is expected to surge with a tsunami of local buyers. Investors who act now stand to benefit from significant capital appreciation in the coming years. The countdown to the next market boom has started.
"The next major wave in Turkey’s real estate market is already underway. Demand is rising, and prices are beginning to climb. Investors who act now will be strategically positioned to maximise their returns as the market reaches its next peak between 2027 and 2028. Secure your financial future today, contact us for a personalised investment strategy tailored to your goals."
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