Effects of Inflation and Rising Costs on Real Estate Prices
The pandemic and the Russia-Ukraine war that started right after it is dragging the world economy to points we could not even imagine in 2019. In addition to the disruptions in the supply chain that we started to experience during the Covid process, the worldwide increase in energy, food and commodity prices, especially oil and gas, which emerged with the effect of the Russia-Ukraine war right next to us, caused price increases that we are not accustomed to in the products we use on a daily basis, but also very painfully. pulling causes us to live.
This is seen as 'inflation' in the market. According to Wikipedia, Inflation is 'a situation that expresses a continuous and perceptible increase in the general level of prices'. Yes, this is exactly what we experience, but there is a difference this time; The economy of Northern Cyprus, which is a small-scale economy that uses Turkish Lira and is deeply connected to the Turkish economy, has gotten used to living in an inflationary environment, but pricing durable goods, automotive, real estate, etc. in foreign currency (Dollar, Sterling and Euro), at least, price increases in these areas are at tolerable levels. was keeping it. Now, even in developed countries, inflation, which is in the range of 7% - 10%, causes even some prices that seem stable on a 'currency basis' in Northern Cyprus to increase at an unusual rate and speed.
Unfortunately, construction materials are also included in these rapidly increasing products. According to the owners of the construction companies whose accounting and pricing I trust, and with whom I have worked in the market for a long time, the increase in the prices of construction materials in Northern Cyprus has exceeded 30% on a foreign currency basis.When we add the increases in diesel prices in foreign currency, the increase in construction costs has approached almost 40% on a foreign currency basis...
This brings us to an interesting point in terms of the market: The housing market, which has already contracted due to the pandemic process, the economic crisis and high interest rates, becomes unable to use marketing instruments such as 'discount' and 'long-term payment' that can mobilize the market. Because the construction companies will either prefer not to sell the same flat or villa because of the sales to be made as a result of such discounts, because it will cost almost 40% more expensive, or they will prefer not to sell it or leave the market and move to another sector...
My prediction is as follows: Currently, there is still a stock of finished housing from the Kovid Period, especially in our Nicosia region. However, as the existing stock of finished apartments and finished villas is depleted and the increase in the prices of construction materials begins to be reflected on the sales prices of the houses, it will be inevitable that there will be an increase in house prices in the coming period. These increases will be gradual. At first, the Contractors will try to suppress the increases in sales prices by reducing a little from their profits, but after a while they will not be able to hold on and will reflect the cost increases to the housing prices.As a result, by the end of summer, we will see high price increases in real estate prices, as in everything else, which in my opinion is at least 30%!
In addition to my usual advice to those who want to keep their money and investment in real estate, which is the 'The Safest Port', I would like to recommend especially finished apartments and finished villas this month, in addition to the Land/Land and Commercial Properties. Because in a not very long process, it is inevitable that they will experience an increase in value on the basis of foreign currency.
With my love and respect,
Dengiz KÜRŞAT