Turkey has many of the ingredients of an excellent investment
location as well as being popular tourism destination with low
real estate prices, buy-to-let and a strong re-sale market.
Low Real Estate Prices
The housing market in Turkey was held up behind Europe as a
result of the difficulty of obtaining mortgages. The majority of
real estate purchases until recently were funded through
inheritance or savings, which set a limit on the flourishing
property market simply by not being affordable. The Turkish
Government is committed to strengthening the mortgage market,
which is an important step because short loan terms and high
interest rates mean that at the moment only 3% of housing
finance in Turkey currently stems from bank credits.
Turkey approves a new mortgage law this February (2007)
This new law is expected to be enacted in May 2007. Provision of
mortgages with low interest rates will make housing more
affordable and cause house prices to head upwards. The
government of Turkish law was passed in January 2006, and
confirmed the right of foreigners to buy property under 2.5
hectares in size for personal use or business. It is now
possible for foreigners to obtain a local mortgage, further
encouraging this emerging market.
Strong Resale Market
Turkey is getting richer, and house prices will grow accordingly
with the increasing wealth of the country. The Turkish economy
grew by 9.9% in 2004 alone, the highest recorded growth that
year within an OECD country. Morgan Stanley's global economics
team believes the Turkish economy will continue to outperform
the rest of the world, as the growth rate of real gross domestic
product (GDP) accelerates from 6.2 percent in 2005 to 6.5
percent in 2006 and then on to 6.8 percent in 2007. Turkish
population growth is around 2% per annum with 70% of the
population younger than 30, and this is creating a very strong
local market with good purchasing power.
Investors would not be reliant on international investors for
re-sales, hence strong internal property market demand should
increase.
Foreign Investors
Turkey has received a large amount of foreign investment. This
investment is being used to rapidly improve Turkey's
infrastructure. Property funds based in Europe and the Gulf are
also pouring money into the country, with Dubai a particularly
heavy investor in Turkey as an attractive destination. Corporate
investors are creating new resorts, golf courses and other
tourist facilities, while public funds are targeted at improving
roads and airports. These are clear indications of a growing
tourist economy that will greatly boost capital growth for
today's property investments. Huge golf tourism is evolving in
Antalya-Belek, which will increase the value of any investment
in that region.
Strong Buy to Let market
Over 25 million tourists visit Turkey each year, boosting the
property market and creating strong "buy to let" possibilities.
Gross rental yields in Turkey vary from moderate to high.
Properties in major city centres offer yields of 7.6%, while
property in coastal areas can yield from 13% up to an impressive
16%. The low cost of living and affordable and frequent flights
from most European cities are making the country an easy place
in which to have a second home.
All in all, Turkey has a great deal to offer to buyer - be it
for investment, retirement or just a holiday home.
Written by Nazan Arikan
|
Strong Capital Growth in the Turkish Property
Market |
Those looking to
capitalise on property investment in emerging
markets should be keeping a close watch on Turkey.
Turkish property prices are drastically pushing up
and up, with capital growth strong at 25%. There is
a steady stream of demand for property by local
people - after local mortgages were introduced in
February 2007 enabling investors to borrow up to 80%
of the value of the property.
Added to this, the liberalisation of the real estate
market in 2003 attracted international investors to
Turkey, regardless of the issue of EU accession. The
United Arab Emirates will invest 4.4 billion Euros
in the Turkish real estate sector, UK-based Fund
Managers and large real estate developers both
include Turkey in their residential property
investment. Major European, USA banks and investors
have gradually established a physical presence in
Turkey by locating branch offices there.
Property values have in many places increased by in
excess of 100% and in some city centres properties
have increased by as much as 150%-200% since 2003.
The sales of property in Turkey have exploded and
over 21,000 buyers from the UK, Ireland, Germany and
Holland have invested in property along the Turkish
coastline.
The Country's property market has seen an increased
supply of extremely high quality property
developments, especially in major costal areas and
cities. Six million new homes are expected to be
built in Turkey by 2016. The Turkish banking system
was not prepared for this growth, and has no real
estate financial tools and lacks the capital to
finance the real estate business. Eventually The
Turkish Government has reacted to these problems,
and approved a new mortgage law in February of this
year, which is expected to be enacted by May (2007).
70% of a young population of hungry buyers will be
in the market for their first houses. It is
predicted that Turkey's annual housing loan market
could swell to as much as $60bn annually when the
mortgage system begins operating at full swing.
Turkey - with 25% per annum Capital growth on
property and an average 7.6% rental yield is indeed
a very promising region in comparison to most of the
Western European and some East European countries.
