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Istanbul Skyline

Property professionals have said that Istanbul is doing for Turkey what London is doing in the United Kingdom, acting as an engine for growth in the housing sector across the country.

That’s based on Istanbul’s price growth – more that twice the rate of growth in April compared to a year ago, and continuing to go up fast. In the first two months of this year, the market appeared to be slowing in Istanbul – ‘traditionally times when the market takes a breather,’ in the words of Adil Yaman, investment director at real estate agency Universal 21.

In the first few months of 2014, there were fears that the contsruction and real estate industries – worth 30% of Turkey’s GDP since 2002, according to the Turkish union of construction industry companies, Intes – may be in danger. A sharp decline in the value of the Turkish lira and rising interest rates threaten the real estate industry, and political turmoil beginning last year make progress precarious. A few short months ago, Fulya Kenber, a Century 21 broker in Besiktas, a central Istanbul neighbourhood, warned the Wall Street Journal, ‘higher rates and a weakening currency are negatively impacting property sales because people… have no trust.’

However, in April, prices rose by more than 1% month on month, according to data from Gyoder

As opposed to the early part of the year, when ‘we would normally expect fluctuations in growth,’ says Mr. Yaman, the buying season usually reaches a peak in August. In August of 2013, Istanbul saw price growth over 2% in a single month, adding £1, 000 to the price of a £50, 000 apartment. Istanbul saw highest annual increase in property prices in Turkey, at 15.59%, compared with 5.85% for Antalya in the same period.

Monica Anca, director of Universal 21, expains the role Istanbul plays in Turkey’s market. ‘The city has seen huge investment in its infrastructure, which hasn’t always been popular with locals, but the pace of change in the city is rapid and the population is rising with it.  So it comes as no surprise that this puts pressure on existing housing stock.’

As Ms Anca went on to observe, ‘the health of the housing market is important to Turkey’s economy as it is in other countries because it provides jobs ion construction and helps provide a platform for growth in other areas of the national economy.’ She also pointed out that growth was unlikely to slow significantly in the city, after ‘the announcement of a third airport in the city which will provide a boost to suburban areas like Beylikduzu.’

‘I think the signs are positive for another year of strong growth,’ Ms Anca concluded.

Across Turkey, rising prices in Istanbul aren’t necessarily going to produce a similar rise across the country – but they will stimulate the economy, provide an additional incentive to reform and stability and boost the jobs market, as well as improving access. As Turkey increases its presence on the map for overseas buyers, it makes itself a promising country to look for investment properties in areas like Kusadasi, Didim or Bodrum, a traditionally luxurious coastal resort where property prices run from £40, 000 for a 2-bedroom flat to over a million for villas overlooking the Turkbuku bay area.

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Imagine a hotel with champagne that costs £36 a glass, offers remote controlled toilets (no kidding) when you go for your private business and is situated on one of the most remarkable coastlines of Europe – introducing the very expensive Mardan Palace on the Turkish coast of Antalya. Reminiscent of a European Dubai as the Times Online labelled the area, Antalya is fast becoming the latest tourist hub for sun starving tourists of northern regions.

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On the shores of the Mediterranean with its own pine forests and plenty of European charm lies Belek. Discovered back in 1984, Belek is located in the Turkish coast and lies approximately 30 km east of the Antalya province.

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Back in 2006, renowned German architectural firm Bothe Richter Teherani Architekten revealed this building that was to grace the Istanbul skyline – Garden Tower. Garden Tower’s construction was suppose to commence back in 2006, however, more recent reports indicate that the Garden Tower project hasn’t started as yet and might commence in the second half of the year. Plans for the project show a bullet like tower consisting of 52 floors with 44 of them being above ground level.

You just have to love or hate the design.

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If cash is in your pocket then Turkey’s Istanbul might be the place to look for a new home. Thousands of British, German and Middle East expats flock to Turkey as the global economy has created some sort of property meltdown with dropping values, opening opportunities for those who still can – pay that is.

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Just when we thought that the global property gloom & doom was never-ending, we appear to see a ray of hope emerge. That ray right now is on Turkey. With most global markets suffering from oversupply, price hikes and rising interest rates, Turkey shows us that there is indeed hope.

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Miracle Resort Hotel Antalya - Turkish Resort
A Resort in Antalya: With Turkey’s new FDI law in place foreign property developers have been barred from developing resorts like this

A law allowing the sale of real estate in Turkey to foreign companies was annulled by Turkey’s Constitutional Court last Friday. In an attempt to gain entry to the EU, Turkey’s centre-right government previously approved the law allowing the sale of Turkish property to foreign individuals and businesses. This however changed on Friday when the ruling of Turkey’s Constitutional Court favoured the nationalist-leaning Republican People’s Party.

This decision by the court would ultimately affect companies specifically set up to acquire property in Turkey by foreign investors through joint ventures.

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Antalya Turkey
Antalya Limani Turkey [Photo credits to Erdalde on Flickr]

This summer there has been a change of emphasis in news and publicity about Turkey. Those with long memories will think of the terrible Izmit earthquake of 1999 and more recently Turkey’s tourism potential was the subject a substantial TV advertising campaigns. However, the latest news has been about the electoral success of Recep Tayyip Erdogan, based on the country’s booming economy (with a few items about the tricky situation along Turkey’s frontier with Iraq).

Turkey appears to be on a wave of economic success, making the country increasingly important vis a vis the European Union, its main trading partner. In terms of property investment, this encouraging big picture suggests that Turkey is a good place to consider. Sites such as Nirvana certainly have lots of upbeat stories about investment in Turkey with companies as diverse as Germany’s ECE (shopping centre developments) and Sama Dubai investing at present.

Focusing on real estate development, Rhiannon Williamson of Amberlamb was notably upbeat earlier in 2007, instancing investments by ETA Star and Emaar Properties, both of the UAE. Citibank extending its well-established Turkish network with a new branch in the southern coastal metropolis of Antalya should be taken as symptomatic of the prospects for the country’s economy, especially its further tourism potential. ING Real Estate is planning to invest upwards of half a billion euros in Turkey in the next few months.

For the private real estate investor Conti will give mortgages to Belgian, Dutch, German and UK nationals for up to 200,000 euros (or the higher level of £250,000 for UK citizens) with an LTV of 75% for Istanbul and the main tourist areas or 60% elsewhere. The maximum term is 15 years and the current variable rate for sterling mortgages is 7.75% (which seems very reasonable compared, say, to buying in England through the Abbey National).

Given that Turkey has a higher inflation rate (8.2% in 2005 according to the World Bank) than either the euro zone or the UK, this seems like a good deal but bear in mind that there is bound to be some exchange rate risk. From next year investors should be able to take out local currency mortgages but presumably the high rate of inflation will bump up interest charges.

Interestingly, ING (see above) does not plan to target a local company for takeover although ING did acquire Oyak Bank for 1.9bn euros in June. Possibly, they have a partnership deal in mind because the Turkish market is not highly rated for transparency. The private investor should be prepared for any of the following: problems with title, poor build quality and lack of reliable price information.

Rental yield data seems particularly hard to come by although the extended holiday season (some districts boast 300 days of sunshine) should help. Although tourist visits to Turkey have been rising quickly (24 million visitors in 2005), tourist spending is not so impressive (approximately $760 a visitor) although this doesn’t take account that some of these visits would have been city-breaks in Istanbul and holiday lets paid for in the visitors’ home countries.

Michael Harrop of New Turkish Properties estimates that the value of Turkish holiday property has gone up by 40% since the same time in 2005 and forecasts another 40% increase between now and 2010.

First-hand information on the rental market in Turkey’s tourist centres would be most welcome.