Property Investment in Turkey in 2007 Will Soar

Turkey is such an exciting nation with incredible potential for growth in many sectors - from automotive manufacturing to tourism for example – and this growth will most certainly enhance both the commercial and residential real estate industries for a number of significant and sustainable reasons.  As a result of these facts Turkey is definitely one of our favourite emerging markets for 2007 and it is our belief that property investment in Turkey in 2007 will soar and the foundations will be laid by many for the attainment of substantial profits over at least the medium term. 

However, as with any emerging market it is not all plain sailing in terms of profiting from property in Turkey and as a result this overview of the Turkish property market prospects for investors in 2007 will aim to show both the main prospects for growth and also any significant factors that could potentially inhibit the ongoing appeal and development of the property market.

The Positive Factors Driving the Appeal of Investment Property in Turkey in 2007

Local Demand

Half of Turkey’s population is under the age of 25; as these individuals grow up, mature and marry and take jobs and seek housing so they consistently push up demand for property particularly in the cities of Istanbul, Ankara, Izmir, Konya, Bursa, Adana, Antalya and Mersin where almost half of Turkey’s population is already housed. 

This demand for residential property cannot currently be met by the levels of construction under development and as the rate at which rural migration intensifies and the numbers of Turkish people moving to cities and employment hotspots shoots up, so a housing crisis is on the verge of ensuing particularly in Istanbul.

To meet this incredibly high level of demand for property for sale and rent, local developers are increasingly entering into financial arrangements with international investors to fuel a construction boom.  It’s estimated that in Istanbul alone some six million units need to be constructed and completed by 2012 to meet demand at its current levels, and when you appreciate that increasingly Istanbul is becoming a city for international professionals to move to for well paying, good jobs, the levels of demand could surge even higher.  Furthermore, as GDP grows so the affordability of the local population is enhanced meaning that there is demand and affordability in the property market in Turkey – just the perfect environment for investors.

There is a wealth of poor housing stock in Istanbul as well that also needs substantial renovation to bring it up to today’s living and safety standards and all in all, just targeting local demand would offer an investor unrivalled potential for growth and income in Turkey.  2007 is an excellent time to enter the market for those who can fund their own investments before changes are made to mortgage law and loans are easier to acquire by many…at which point even more investors will enter the market and prices for land and real estate that have been rising fast will increase even further even faster.

FDI

Foreign direct investment in Turkey is rapidly increasing as a result of the Turkish government working consistently hard to make investment both easier and more attractive.  As a result of the government’s efforts between January and October in 2006 alone almost USD 16 billion was committed to Turkey in the form of FDI.  Money is flowing into everything from banking to manufacturing and one particular sector where FDI has reached record levels is the real estate sector.

A number of significant international property companies such as Emaar Properties and ETA Star have committed millions to housing and commercial property projects in Turkey, and going in to 2007 bidding is taking place for a range of new projects such as the biggest real estate project to date in Istanbul for the construction of three skyscrapers and a yacht marina.  Apparently Donald Trump is in the bidding war for the development that will be constructed in Zeytinburnu.  But Istanbul isn’t the only area to be boosted by FDI; there is a great deal of investor focus beginning to target the Southern Turkish coastline which has a hugely successful tourism industry already and all of this investment confidence and contribution is allowing for the creation of jobs and meaning that local purchasing power is significantly improving.

Travel and Tourism

According to the World Travel and Tourism Council Turkey has barely even scratched the surface in terms of potential from its travel and tourism industry.  Currently all Turkey offers is sunshine holidays on the coast, but because the nation is so vast and diverse it has the opportunity to develop as an eco tourism, business travel, adventure tourism, ski holiday and cultural tourism centre as well - but it is lacking serious investment.

The government has committed to a series of infrastructure improvement and expansion plans to open up the market to more travellers and it has designated certain towns as key for investment for tourism growth, but still the private sector is supporting this industry proving just how much can be achieved but also highlighting the fact that there is almost immeasurable potential for growth and profit in the travel and tourism industry in Turkey.

Travel and tourism demand means more demand for rental housing, it means more demand from the business community for commercial premises to service tourism and it also means more people will discover the delights of Turkey and has so often been said, today’s holiday maker is tomorrow’s holiday home buyer meaning that likely growth in travel and tourism will also reflect positively in terms of demand on the property market in Turkey.

Turkish International Relations

The final positive factor driving the appeal of investment property in Turkey that we would like to bring to your attention is the development of Turkish international relations.  Some people are convinced that Turkey will one day join the EU; to that end the Turkish authorities have certainly done and are continuing to do all they can to align policies and decisions with those acceptable to the EU, and if EU entry came then inward investment would soar even further…but increasingly in terms of Turkey’s economic development it is mattering less and less whether Turkey joins the EU or does not. 

Turkey has an excellent standing with NATO, it already has good export levels in place with Europe and it has found itself positively aligning more and more with nations to the east of its borders.  For example in 2006 Turkey and the UAE cemented political and economic friendship ties and Turkey remains an ally of many countries in Asia, it is a Muslim country without any shadow of fundamentalism hanging over it meaning it is a friend of Western countries from the US to the UK and as it shares cultural and religious understanding with many Asian and Arabic nations it is also a friend of countries to the east of it meaning it is incredibly well placed strategically for acting as a bridge between eastern and western understanding.  We don’t believe it is unreasonable to suggest that politically speaking Turkey could become one of the most important nations in the world in the near future as it manages to bring together in harmony divergent cultures, religions, beliefs and standards meaning that for an investor to ignore Turkey is tantamount to insanity!

Negative Issues Inhibiting the Development of Turkish Property Market Prospects

Mortgages, Finance and Interest Rates

There is as yet still no mortgage law in Turkey – such a law is needed to allow local banks to secure housing related loans on property thus encouraging the development of a mature mortgage market and ultimately encouraging home ownership. 

Such a mortgage law would also give local banks access to long-term international funding that’s available for the development of housing related finance in emerging markets like Turkey.  All of this would ultimately aid and abet home ownership among local Turks which naturally would have a very positive effect on the economy in Turkey and the property sector in particular.  However, the national assembly’s failure to bring this law before parliament is a disappointment and it is holding back the development of the property market in Turkey.

The latest predictions for the law to come before parliament are early 2007, but until the law is passed there will be a massive barrier in place restricting the growth of the real estate marketplace.  You can add to this issue the fact that financing available locally to developers and constructors is beset with cripplingly high interest payments which also discourages the development of new housing stock…fortunately foreign direct investment is coming to the property market and this is helping to offset this problem at the moment.

Construction Costs

The cost of concrete and steel has shot up significantly in Turkey in the past 12 months with the cost of ready made concrete rising threefold in the last seven months alone.  In addition to this increase in construction costs the fact that there is now a requirement for all building work to adhere to EU-type standards and constructors have to ensure that high on-site safety and security levels are strictly upheld means that the overall cost of constructing property in Turkey has increased massively.  This has led to fewer than expected and required projects being started and of all the projects under construction already that have been hardest hit it is the ones targeting local housing issues that are most affected.  The lower cost housing projects initiated by the government to target certain pockets of homelessness and poverty are at risk of failing and this will be a massive blow for Turkey.

In terms of the attraction of the property market for investors, naturally when it comes to new projects higher construction prices are passed on to buyers and this can reduce potential profitability on a unit by unit basis.

Immature Policy Decisions

Turkey’s competitive edge can sometimes be harmed by seemingly immature policy decisions or over dramatic reactions and decisions taken relating to investment restriction or speculation suppression for example.  When the government banned all foreign sales while it got its property law affairs in order it did massive damage to the housing market as foreign buyers were turned off the thought of Turkey by what they saw as seemingly bizarre political behaviour.  Turkey has to firm up and maintain policies affecting the competitive nature of the nation particularly when it comes to the real estate market if it wants to benefit from strong inward investment from overseas buyers and investors.

Ultimately we stand by our conviction that Turkey offers unrivalled potential for an investor seeking growth, development, profit and strengthening yields and 2007 will be a great year for market entry with investors able to commit to at least the medium term likely to reap the most significant returns.

Special Reports: Property News for Turkey

Turkey for Property Buyers
The investment opportunities available to a property buyer in Turkey are inimitable and the future prospect for an investment great.

Turkey Property Buying Process
Foreigners wishing to buy investment property in Turkey have to be aware of various restrictions that apply

Turkey Property Investment Facts
Turkey's property market is gaining massive momentum and property investment interest in Turkey is surging