The year 2021 was a year in which the Turkish Lira lost considerable value against foreign currencies and products and services in almost all sectors were subject to exorbitant increases. Increases in fuel, electricity and natural gas prices have also had a significant impact on the real estate sector. In addition to real estate sales prices, housing and workplace rents have also increased significantly. The pandemic conditions that have lasted for a year and a half have also had a great impact on the exorbitant increase in real estate prices and rents.
How is the rent increase rate determined?
Until 2019, the rent increase rates were determined according to the 12-month PPI, i.e. the Producer Price Index. As of 2019, the CPI index will be used instead of the PPI index to determine the rent increase rate. Consequently, the CPI, i.e. the average Consumer Price Index of the last 12 months, is used as the basis for determining the rent increase rate.
For the period January through November 2021, rent increase rates were realized at the rates shown in the table below.
2021 Rent Increase Rates (%)
January 15.18
February 12.28
March 12.81
April 13.33
May 13.70
June 14.13
July 14.55
August 15.15
September 15.78
October 16.42
November 17.09
November 2021 rent increase rate has been announced!
TurkStat announces PPI, WPI and CPI indices every month. The CPI index increased by 2.39% in October compared to the previous month; 19.89% compared to the same month of the previous year; 15.75% compared to December of the previous year and 17.09% compared to the twelve-month average. In this case, the maximum rent increase in November was 17.09%.
Sample calculation:
House Rent TRY 2.000
CPI November 2021 Rent Increase Rate % 17,09
CPI November 2021 Rent Increase Amount: TRY 341.80
Increased Rent Amount:
TRY 2,341.80
If the PPI index, which is the basis for rent increases, was still valid until 2019, rent prices would undoubtedly be higher. Because in October, the domestic PPI was realized as 36.2%. In this case, the maximum rent increase rate would also be 36.2%. If we apply the above calculation to the PPI index, it would be inevitable to face much higher rent increases than the current ones. For example, for a house with a rent of TRY 2000, an increase of up to TRY 724 would be possible in a contract renewal to be made in November.
What Do The Tenants Say About the Rent Increase?
The fact that the rent increase rates are much higher than the previous years, of course, makes the tenants brood. While the rate of increase foreseen when the lease is renewed/extended is indexed to the CPI, there is no criterion for the rent increase to be applied when the tenant changes. In this case, the landlord can set the rental price according to the market conditions and not according to the CPI index. If the rent price is set according to the market conditions, the amounts will be much higher and the tenants will be more victimized.
Tenants are complaining about both the rent increase based on the CPI index and the rent increase based on market conditions. The high rate of increase in the cost of basic necessities, such as electricity, natural gas and fuel oil, has strained the budgets of almost all citizens. With these increases, it has become inevitable that workplace and residential rents will also increase. For those who live in rented accommodation or run a rental business, we can say that the days that will put a lot of strain on the budget are at the door.
On the other hand, according to the Household Budget Survey conducted by TurkStat in 2019, housing and rent expenditures have the highest share of consumption expenditures at 24.1 percent. According to these statistics, a quarter of a family's monthly income in Turkey is spent on house rent. While this rate increases to 30% and more for those with low income, it decreases to 20% for those with high income.
In conclusion, since the need for housing is one of the indispensable needs of individuals and is continuous, the price increases in this sector deeply affect citizens who are tenants.
What Do Landlords Say About the Rent Increase?
At a time when tenants are complaining so much about rent increases, one would expect landlords to be happy with rent increases. However, this is not the case. Landlords believe that rent increases are below what they should be. Since the beginning of the year, rent increase rates have increased between 12% and 17%, as shown in the table above. On the other hand, basic necessities such as electricity, natural gas, coal and fuel oil were increased at much higher rates. The fact that these rates are much higher than the rent increase rates has put landlords, who live on their rental income, in financial difficulties.
So how much has increased for which product in the last 1 year? What is the picture when you compare rental price increases with other increases?
In 2021, Fuel and Heating Price Increases (%)
Residential Electricity 21
Kitchen cylinders (lpg) 41
Diesel (Diesel Oil) 24
Domestic coal 53
Imported coal 118
Natural Gas (ist) 23
Gasoline 18
Lpg autogas 63
As can be seen in the table, the total rate of increase for fuel and heating items was higher than the rent increase rate for almost all items. On the basis of these data, it is understandable that landlords consider the ceiling for rent increases to be too low.
To sum up the problem, the increase in rent prices satisfies neither tenants nor landlords. While tenants struggle to find affordable housing due to astronomical rent increases, landlords complain that rent increases are below the rate of increase in other items. As a result, tenants and landlords are just as uncomfortable with the needle-like increases as everyone else. Ultimately, the citizens' budgets and spending on the real estate sector are negatively affected.
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