Inflation rate sets maximum rent hike at 65 percent

ISTANBUL

As the 25 percent cap on rent hikes expired as of July 2, landlords and tenants waited for the inflation data for June because if a contract is to be renewed this month, the rent hike should be in line with the 12-month average consumer price inflation.

The cap was introduced in June 2022 for two years but the government decided to discontinue it.

According to the latest numbers of the Turkish Statistics Institute (TÜİK), the 12-month average inflation rate was 65.07 percent, which sets the upper limit for rent hikes.

This will apply to contracts to be renewed after July 2 and does not mean rents should be increased automatically as much as the 12-month average inflation rate. Landlords may demand a hike less than inflation. Contracts are renewed only once a year and the rent hike is decided at the time of renewal.

According to laws, landlords cannot demand a rent hike above the 12-month average consumer price inflation. Last month, consumer prices advanced 1.64 percent from May, less than most economists had expected. The headline CPI inflation, thus, slowed from 75.45 percent in May to 71.6 percent in June. Top government officials and the Central Bank had forecast a decline in annual inflation starting from June.

However, in the minutes of the latest rate-setting meeting, released on July 3, the Central Bank warned that rent inflation is expected to remain high in the short term and will be the main group that will restrain the anticipated slowdown in consumer inflation.

The annual increase in house prices continued to decline in real terms, while the seasonally adjusted data point to a significant slowdown in monthly increases in this item in recent months, the bank noted.

“This development in house prices is expected to have a restraining effect on rent inflation in the coming period,” it said.