It will be a painful process for the market to regain its equilibrium..

Obviously, prices won’t go up all the time. This skyrocketing ascension will come to an end one way or another. However, the volatility will continue, and it will take a year perhaps for prices to stabilize again. During this period, “fear” and “opportunity” based pricing will be replaced by “cautious optimism”, but we will have to wait for some rationality. But not now.

Dear friends, I deliver presentations at the meetings of various foreign companies operating in Turkey. While I am happy to see that foreign interest continues despite the economic difficulties in the country, the questions they ask also make me realize that they are worried about the money market.

Foreign capital converts the dollars into TRY and invests, therefore it always looks to gain profitability from the currency it has converted. Since there has not been any situation so far in which foreign companies have taken away all their profits back to their home countries, they do not want the values they have created to melt away because of high exchange rates. But sadly, they began to suffer from operating losses, especially insurance companies, let alone making profit.

The prices in the auto market has been calming down lately due to lack of supply. I see that the warning I’ve been making since the beginning of the New Year is becoming true. It looks like the inspections by the Competition Board and the latest measures it has implemented have been quite useful in helping to eliminate making money with “backdoor” methods and manoeuvres in the market layers. So, it will be necessary to closely monitor the value of the cars purchased with loans. The real estate market is not going through the same process yet. Prices are quite high. But I have a thought for that too:

“Rents Are Going Crazy!”

I highly expect that the prices in dollar terms will calm down and become stable after a while. Well, they can rise in Turkish Lira because of USD to TRY exchange rate. However, I think that house prices will remain calm for a longer period in foreign currency terms. Unless, of course, there is a development that causes a rapid decline in exchange rates. The system in Turkey works as follows: when the exchange rate rises, the pricing in TRY increases, and when the exchange rate falls, the pricing in USD goes up. There are investors in our country who do not like the risk of losing, let alone losing.

Here are the latest developments in rents: the landlords in Istanbul are not satisfied even with 100% hike, regardless of their property’s age or location. These landlords try to enforce three times or more of the current rent, and promptly want the tenant to evict the house if they do not accept their ridiculously exorbitant demand. Recently, a relative of mine living in Kadıköy said, “I was paying TRY 12,000 rent, I said I would pay 20,000 for the new year, the landlord asked for 40,000!” It is obvious that only people with a certain level of income can afford such skyrocketing rents.

It looks like another prediction of mine will once again become a reality. There will no longer be anyone left in the central neighbourhoods that we can call “native” or “local”. Russians, Kazakhs, Arabs, and more foreigners will be in the majority in city centres and seaside districts.

All these things also show that Turkey will undergo a cultural and social metamorphosis. The wealth of the newcomers will push the upper-middle-income people in Turkey down to lower-middle-income class, and of course the lower strata will fall one step more. We need to start thinking right now about the changes that all this will create in demand, investment, and credit behaviour.