In Turkey, real estate prices are rising fantastically fast.

In April of this year, another luxurious villa was sold in Istanbul, the former home of a leader of a sex cult who was recently sentenced to nearly900 years in prison for a series of crimes.

Although rental and real estate prices in Istanbul have never been low, even ordinary Istanbul properties have become unaffordable for most Turks. In the two years to May, the price per square meter of real estate in the city rose by more than 480%, according to a report by Endeksa, a consulting firm.

Even after accounting for inflation, which peaked at 86% year-on-year last fall and then slowed to just 40% in May, home prices in Turkey as a whole rose 51% last year, more than in any other major economy, according to a Bank for International Settlements survey. Second place went to Israel with a value of 11%.

Rents have also risen significantly. Average rents in Istanbul, home to more than 16 million people, now exceed the average income, a senior municipal official said.

The culprit is the reckless interest rate cuts imposed due to the misguided policies of Turkish President Recep Tayyip Erdogan and the subsequent explosion of inflation. This combination of circumstances has prompted those Turks with access to sufficient credit to protect their wealth by investing in real estate. Foreign buyers, especially Russians, have also contributed to price increases in Istanbul and on the Mediterranean coast.

The earthquakes that devastated much of southern Turkey earlier this year, killing more than 50,000 people, also had an impact. Many of the estimated 3 million people affected by the disaster have moved to other parts of the country, causing an almost immediate surge in demand.

One would think that this could lead to a bubble that would soon burst. But even the policy change that began on June 22, when the Turkish Central Bank raised its benchmark interest rate by 6.5 percentage points, may not be enough to bring the real estate market down to earth. Analysts predict prices will continue to rise, though not at such a rapid pace, as long as inflation expectations remain high.

But that's just the way it is. The new interest rate hike, which is considered too low to make a significant difference, did not take the pressure off the lira: it fell 3% against the dollar in just an hour after the decision was made. The currency has since lost 18% since Erdogan's re-election on May 28. This, and the recent 34% increase in the minimum wage, on top of the 55% increase six months ago, is certain to fuel inflation.