Critical Housing Warning from Istanbul Gelisim University: Bubble Risk Rising in Major Cities!

The extreme increase in housing prices in Turkey's three largest cities—Istanbul, Ankara, and Izmir—is closely affecting both citizens who wish to become homeowners and investors. The ongoing “price bubble” discussions in the real estate market have reached a critical point, as emphasized by experts. In this context, Assoc. Prof. Hakan Yıldırım and Economics Analyst Prof. Meltem İnce Yenilmez from Istanbul Gelisim University, who were internationally awarded for their work on bubble tests in stock markets, evaluated the current state of the housing market.

“When Prices Diverge from Fundamentals, a Bubble Forms”

Assoc. Prof. Hakan Yıldırım noted that while housing price bubbles share similarities with those in stock markets, they also involve unique, complex dynamics. He explained: “A housing price bubble occurs when the market value of properties diverges significantly and unsustainably from core economic indicators such as rental income, household income, interest rates, construction costs, and demographic factors. This divergence is often driven by speculative expectations and the perception that ‘prices will continue to rise indefinitely.’”
Yıldırım emphasized that bubble risk increases when housing is seen purely as an investment vehicle—bought and sold for appreciation rather than for renting or living.

Price-to-Rent and Price-to-Income Ratios Are Key Indicators

Prof. Meltem İnce Yenilmez highlighted the importance of two fundamental indicators in identifying bubbles: the price-to-rent and price-to-income ratios: “The price-to-rent ratio shows the ratio of a property's sale price to its annual rental income. If this ratio significantly exceeds historical averages or international benchmarks, it indicates that housing prices are overvalued relative to rental returns.”
She added that the price-to-income ratio measures housing affordability based on household income. A sharp rise in this ratio suggests that homes are becoming increasingly unaffordable for the average family—another indicator of bubble risk.
Assoc. Prof. Yıldırım also mentioned the use of advanced econometric tests, stating: “As in our award-winning study on stock markets in Romania, 'right-tailed unit root tests' can also be applied to real estate price indexes. These tests help identify “bubble episodes” by detecting self-reinforcing, accelerating trends in price series.

“Housing Supply Can't Keep Up with Demand”

Yıldırım stated that housing is seen as a safe haven across Türkiye: “To protect their savings from inflation, people are turning to real estate, pushing prices up nominally.” However, he underlined that the formation of a bubble depends on how far prices deviate from economic fundamentals.
Based on national and international analyses, Yıldırım confirmed the presence of bubble indicators in Istanbul, Ankara, and Izmir: In Istanbul, limited land availability, high migration, and foreign investor interest are continuously driving prices up, especially in luxury and central locations where speculative expectations are stronger. In Ankara, although price ratios aren’t as high as Istanbul’s, they have also surpassed historical averages. In Izmir, increased internal migration has caused sharp price increases, particularly along the coastline, suggesting a potential overvaluation.
Yıldırım pointed out that housing supply in Türkiye is not responding fast enough to rising demand, which further drives up prices. He also mentioned the impact of increased foreign purchases, growing interest in new housing projects, and pricing in foreign currencies.

“Investment Decisions Should Be Based on Fundamentals”

Prof. Meltem İnce Yenilmez issued an important warning for those considering investment in the housing market: “Instead of following price trends, focus on core values and long-term sustainability.” She advised that buyers carefully assess rental potential, demographic structure, transportation access, and social infrastructure of the area before investing.
She also warned: “Avoid purchasing homes with high levels of debt, and be prepared for potential price corrections.” Rising interest rates may make housing loans more expensive, exerting downward pressure on both demand and prices. In conclusion, she stated: “Rational decision-making, in-depth research, and continuous monitoring of market dynamics are key to success in this period.”
Experts emphasize that the risk of a housing bubble must not be ignored, and investors should focus not just on prices but also on economic fundamentals and sustainability. Detailed analysis, adherence to core indicators, and long-term thinking stand out as the most robust investment strategy in today’s market.