The world economy, which has become fragile with the effect of the pandemic and then the Russia-Ukraine war, is struggling with inflation values that are higher than expected. While real estate is among the sectors affected by high inflation, the decrease in housing construction due to the increase in construction costs has shaken the supply-demand balance.
Increasing lawsuits against rent increases increase the workload of the courts. Noting that this situation delays the delivery of justice, Denge Valuation Deputy Chairman of the Board of Directors Ahmet Arslan said, “It is very important to ensure social peace by finding a solution that will not make the tenants and landlords suffer as a result of the economic fluctuations we are experiencing. For this reason, taking the average of the last twelve months' KFE (Housing Price Index) average of the rent increases or producing an intermediate formula as (KFE+CPI)/2; It will result in the burden of economic fluctuation experienced by both parties equally.” said.
The world economy, which has become fragile with the effect of the pandemic and then the Russia-Ukraine war, is struggling with inflation values that are higher than expected. While real estate is among the sectors affected by high inflation, the decrease in housing construction due to the increase in construction costs has shaken the supply-demand balance. Migrant waves, which occurred due to the effects of the wars taking place around Turkey, are among the factors that disrupt this balance, along with inflation.
Real estate values generally fluctuate above the inflation rate.
Stating that it has become difficult to keep the peace between the tenant and the landlord under the current conditions, Denge Valuation Vice Chairman of the Board of Directors Ahmet Arslan said, “New leasing transactions are proceeded through the lease agreement under market conditions. However, the increases in lease agreements, which can be described as old ones with a renewal date, are determined over the 344-month CPI average announced by TURKSTAT in accordance with Article 12 of the Turkish Code of Obligations. For example, the rent increase in March 2022 should be 25,98 percent, which is the CPI average of the last twelve months. But when we look at the market conditions, real estate values generally change above the inflation rate," he said.
Both parties should bear the burden of economic fluctuation equally.
Stating that the increasing lawsuits regarding the rent increase have increased the workload of the courts, Arslan said, “This situation delays the delivery of justice. It is very important to ensure social peace by finding a solution that will not make the tenants and landlords suffer as a result of the economic fluctuations we are experiencing. For this reason, taking the average of the last twelve months' KFE increase in rents or producing an intermediate formula as (KFE+CPI)/2; It will result in the burden of economic fluctuation experienced by both parties equally.” said.
Increase in real estate values is above inflation
Housing Price Index data clearly shows the general trend in real estate value increase. According to this; While the average value increase of residential real estates was 86,50 percent annually (February estimate according to January data), the annual inflation increase was 54,44 percent. It is seen that the increase in real estate values is 59 percent above the inflation rate. On the other hand, annual rent increases are based on the average inflation (CPI) rate of the last 12 months. According to the Housing Price Index, the average increase in real estate value over the last twelve months was 44,77 percent. The average inflation rate (CPI) of the last 12 months, based on rent increases, was 25,98 percent.
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