Of all the emerging real estate markets globally, Turkey’s property market is quite possibly the number one choice for investors seeking the best balance between risk and reward. While the nation continues to emerge politically and economically speaking, so there exists risk – but counterbalancing this ever decreasing risk is an ever increasing potential to profit from property in Turkey.
Property investment in Turkey is synonymous with choice – an investor has a choice of location, a choice of investment approach, a choice of target market and certainly an unrivalled choice of property assets - and in our opinion at www.adoproperties.com, this breadth of choice is luring increasing numbers of real estate investors to explore a property market where there are ten fundamental reasons to consider an investment commitment…
1. Turkey’s Investment Property Market Benefiting from Political and Economic Reforms
The Turkish elections in 2007 saw Prime Minister Erdogan re-elected to office as the head of government - yet throughout the election build up there was global concern that a newly elected government would undo the incredibly powerful work that Erdogan had undertaken to lead Turkey forward as a first world economy.
Fortunately these concerns were allayed and it is accepted that Prime Minister Erdogan will continue with his wholly successful political and economic reforms and that the Turkish people are fully behind him – and equally importantly, the Prime Minister is widely respected within the EU according to The Economist Intelligence Unit.
For property investors doing due diligence on Turkey to ensure it has the right foundations for a long term investment commitment, these fundamentals provide exceptional confidence.
2. Turkey Continues on the Path to EU Membership Which Improves Turkish Property Building Standards and Practices
In the past ten years Turkey has undertaken and committed to many significant reforms to strengthen its democracy and stabilize its economy which enabled it to begin accession membership talks with the European Union in October 2005. While no one is under any misapprehension that Turkey’s path to full EU membership will be totally smooth, the nation is fulfilling many of its fundamental and strategic obligations to continue its approach to full EU membership and this fact has allowed international confidence in the nation to increase dramatically.
In anticipation of the funding and new business the nation will receive the closer it gets to full EU entry, global names are committing to the Turkish real estate sector in expectation of significant underlying price increases and demand, and in one significant area this is having a positive effect on the market – the building standards and practices are improving to be on a par with EU standards which bodes exceptionally well for the long term future of the market.
3. The Geographic and Strategic Position of the Nation Provides Substantial Opportunity for Property Investors in Turkey
Geographically and politically located in a position of strategic importance to Europe, Asia and the Middle East, Turkey benefits from investment, business and travel and tourism interest from all three vast geographic regions which translates into significant and broad interest across all residential and commercial real estate sectors.
This adds up to incomparable property investment potential no matter what angle an investor wishes to target, which sector of the Turkish property market they wish to enter and which approach they plan to take, proving the aforementioned point that Turkey is quite possibly the number one choice for investors seeking the best balance between risk and reward because when it comes to real estate, there is such breadth of choice.
4. Sustainable and Improving Local Demand and Affordability for Property in Turkey
It’s a well known fact that the Turkish population is young, dynamic and that large pockets of the nation are rapidly embracing a western lifestyle. Additionally, improved employment prospects, greater access to finance and a promotion of the benefits of owning real property in Turkey are leading increasing numbers of local citizens to the property market meaning that demand is increasing, affordability is improving, mortgage lending is expanding and an investor has a sustainable base upon which to rely for a future exit strategy.
5. Foreign Direct Investment in Turkish Real Estate Dramatically Increasing in Line with Prices
Confidence in the Turkish property market can be measured in terms of the levels of foreign direct investment committed to the market - and the potential and opportunity within the market can be measured in terms of the price appreciation patterns currently being witnessed: - in 2005 property prices increased over 50% in the most in demand coastal locations according to the Turkish Embassy in London, in 2006 Turkish property purchases by foreign investors exceeded USD 2.5 billion according to the Global Property Guide which was a doubling of the figures from two years prior to that and a five fold increase in just over four years. Additionally, almost 70,000 foreigners were registered as being owners of property in Turkey by the end of 2006 which represents almost a 500% increase over the last known figures which were released in the summer of 2003.
Clearly Turkey is attracting significant levels of FDI into its property market, and this increased confidence, demand and affordability is being translated into increasing underlying prices for real estate.
6. Significant Travel and Tourism Growth Translates into Increasing Rental and Resale Demand for Property in Turkey
When you consider that Turkey registered over a 240% increase in foreign tourist arrivals in the period between 1990 and 2005 and that so far in 2007 visitor numbers are already up almost 20% compared to the same period last year, it is more than apparent that Turkey is developing as one of the strongest markets for travel and tourism interest in the world.
While the nation started from humble beginnings in terms of tourism arrivals and related receipts, the government now recognizes the importance of the travel and tourism industry for the ongoing economic growth and success of the country and as a result the government has increased the budget for the Ministry of Culture and Tourism from USD 70 million to USD 120 million.
Currently the tourism industry in Turkey ranks 11th in the world in terms of arrivals and 9th in terms of receipts, and with the greater promotion of the nation internationally and the ongoing infrastructure improvements taking place as well as the arrival of cheap flight operators in Istanbul and at the coastal airports, Turkey’s tourism market growth is impressive yet sustainable. This directly translates into opportunity for an investor – in the simplest terms they can either target the tourism rental market or they can use tourism based demand for resale stock as part of their exit strategy.
7. Turkey has Good and Improving International and EU Relations Giving Investors Confidence in the Turkish Real Estate Sector
Turkey is both an active and contributory member of the UN and NATO, and back in 1964 the nation became an associate member of the European Community. Because of its geographic location bordering many volatile and potentially powerful nations such as Armenia, Georgia, Greece, Iran, Iraq and Syria, Turkey has to play a very placatory yet strong role in international politics and generally speaking, it manages to maintain its role and develop improving international political relations with the likes of the US, the UK and the European community as well.
Naturally this instils confidence internationally which translates into investor confidence which, for Turkey’s property market is already becoming apparent.
8. Real Estate Investors in Turkey Have a Broad Choice of Destinations to Target
Unlike some emerging nations, Turkey has multiple centres of property based potential for investors to explore. For example, Istanbul and Ankara offer an investor the chance to enter the commercial real estate sector and focus specifically on office, retail or even industrial property as both locations are developing rapidly and expanding in terms of the amount of businesses operational from within the city limits. Both locations also offer an investor the chance to corporate let for example. Then you have pockets of tourism based interest – for example in Istanbul you have high end tourism interest, in Belek you have golf based tourism interest, all along the coast you have long summer holiday interest and some of the most popular coastal locations even offer a long-let based winter season as well. This breadth of choice for an investor is exciting.
9. Development of a Competitive Mortgage Market for Turkish Property
A law passed by the Turkish government in March 2007 now makes mortgages more accessible to more people and more flexible as well. Thanks to the recently ratified legislations, mortgage finance is now available over long periods of time to residential property purchasers and many believe this is the first step on the path to a total overhaul of the mortgage market which will transform the entire landscape of the real estate market in Turkey and also the nation’s urban environment as well.
The law allows for variable rates of interest to be applied to home based finance and it’s expected that the mortgage market will now expand significantly – already the law has had an impact as overall, Turkish banks have around USD 20 billion worth on loan for residential real estate today compared to just USD 380 million four years ago.
Foreigners can also now borrow money in Turkey to buy Turkish property and the very first local mortgage made available to a non-resident buyer was granted in July 2007. Naturally enough, the availability of finance transforms the landscape – it allows local and international buyers to enter the market and according to local Turkish press, immediately following the ratification of the law interest from overseas property buyers and investors has soared.
10. Favourable Level of Taxation a Bonus for Investors in Turkey’s Real Estate Market
While tax on income in Turkey is considered quite high, property taxes are just 0.1% of the value of residential real estate, (although this doubles if the property is in a metropolitan area) – further positive news for investors is that according to the Turkish Embassy in London, there is no capital gains tax for foreign investors in Turkish real estate after four years of ownership and funds can be freely repatriated. In addition to this, as long as net rental income from property assets held in Turkey does not exceed EUR 1,095 the income is not liable for any taxation. While these are not great incentives to specifically draw investor interest, they are neither deterrents to discourage investor activity.
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