Turkey: Lots of Potential and Opportunities to Size up

Turkey: Lots of Potential and Opportunities to Size up

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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.