Turkey has developed a reputation as a value-for-money destination, helping to boost the country’s popularity as a property investment destination. Spurred by relatively cheap property prices, demand for Turkey property is growing.
Weak Turkish currency
A recent report from the Post Office named Turkey as one of the world’s most affordable places for Brits’ to visit, due to sterling’s strength against the Turkish lira. Yet, the Turkish currency is expected to fall in value in 2009, according to Deloitte Turkey, making already low property prices even more affordable.
“It (the Turkish lira) started the year (2009) relatively weak due to a 200 basis point interest rate cut by the Turkish Central Bank,” says Homes Overseas’ Percy Pound.
Robert Nixon, executive director, Nirvana International, comments: “From a British buyers perspective the purchase of property in Turkey is a wise move in the current economic climate as it is outside the eurozone and therefore your pound goes further.”
Turkey, which now attracts around 25 million tourists each year, was last year named number one holiday destination for British tourists. Nonetheless, international visitor numbers to Turkey are expected to rise further this year. Travel association body, ABTA, predicts that Turkey will be one of two “big growth areas” in 2009, along with Egypt.
The Turkish economy, which is partly and unsurprisingly reliant on tourism, appears to be well equipped to withstand the current global financial calamity, after recovering from its own crisis in 2001.
A levelling up situation – wage inflation, growing prosperity and access to less constrained mortgage finance – is driving greater domestic and international demand for properties in Turkey.
Mortgages in Turkey were introduced in 2007, enabling buyers under the age of 75 to borrow up to 80 per cent of the property’s value for a maximum term of 20 years, according to Eric Kaya, director of Cumberland Properties. Mortgage borrowing rates currently start from around 5.8 per cent.
Kaya says that the previous inability to obtain mortgages was “stifling demand, preventing people from buying property and holding our (Turkey’s) economy back. The new mortgages that are now available are good news for both Turkish and overseas buyers.”
He adds: “Prices of property in Turkey are a lot cheaper than much of the rest of Europe” and this presents “a lot of opportunities for investors to make very good returns from property.”
The Turkish Statistical Institute shows that there are now around 73,000 overseas nationals registered with Turkey’s Land Registry, many of who will have benefited from recent capital growth.
Property price growth
Estate agent, Aston Lloyd, reports that average Turkish property prices appreciated by 7.3 per cent between 2004 and 2008. Given Turkey’s economic strength, combined with a general housing shortage, hopes of joining the European Union and a maturing mortgage market, Turkish property prices should strengthen further moving forward.
However, there are signs that property price growth may slow across some parts of the country or even depreciate in the short-term, as the worlds’ economy all but grinds to a halt.
Despite the country’s seemingly strong economic position, Turkey’s economy will potentially face a tough year in 2009, having made around £51 billion of financial obligations, according to Deloitte Turkey in its Economic Outlook 2008.
This means that the country will need to raise money in financial resources to cover a current account deficit and matured debt, according to the report. Consequently, an agreement with the International Monetary Fund will be vital to help produce these funds.
Nevertheless, the medium to long-term outlook for Turkey’s economy looks positive, which should in turn benefit the country’s maturing housing market.
Turkish news provider Hurriyet estimates that the rapid growth of the country’s tourism industry will contribute to a property boom in 2010, while investment banking firm Goldman Sachs estimates that Turkey will become the world’s ninth largest economy by 2050.
Where to buy
With a rapidly growing young population of over 10 million inhabitants, developers are whipping up new residential units across the city to meet growing demand for homes.
Prices of property in Istanbul reportedly jumped annually by up to 40 per cent between 2002 and 2005, after a law was introduced, permitting foreign nationals to purchase property in Turkey in their own name. Although capital growth in the city has since slowed, there are signs that prices of Istanbul property will continue to appreciate moving forward, especially as the city will be crowned European Capital of Culture for 2010.
Furthermore, some of the greatest rental yields in Turkey can typically be found in Istanbul, with an average rental return of 7.54 per cent currently achievable, according to the Global Property Guide.
Nixon says: “The rental market [in Turkey] is very good and being fuelled by the continued popularity of Turkey as a summer holiday destination, as well as by local demand, particularly in Istanbul,
“There is excellent potential for long-term lets to professionals [in Istanbul],” says Nixon. “Such is the confidence in the letting sector that many developers operating in Turkey offer rental guarantees. We are currently selling property with a 5-year rental guarantee at 9.5 per cent”.
Away from Istanbul the Turkish government is making significant investment in infrastructure improvements, particularly in places like Bodrum, located along the Aegean coastline, in southwest Turkey. This popular yachting and tourist hub attracts an estimated 70 per cent of all tourists that visit Turkey each year.
Cumberland Properties is currently marketing a luxurious gated development in the region, Seaview Regency, which features 19 contemporary three-bedrooms, three-bathroom, detached and semi-detached villas situated on a hillside overlooking the bay of Kucukbuk. Prices for Bodrum property here start from £165,000.
A cheaper alternative to Bodrum is Altinkum, located 75 minutes from Bodrum airport, where prices for new-build property in Altinkum start from under £20,000.
Before Bodrum was the most popular holiday home destination in Turkey, Kusadasi, situated to the west of Turkey, was originally the most popular destination for British tourists visiting Turkey, during the 1990’s. However, the region’s popularity with Brits’ fell after most flights from the UK were redirected to Bodrum, due to cheaper landing costs.
“Enquires from Brits’ for homes in Kusadasi have risen substantially in recent months,” says Tracey Ogretici of Elite Homes Turkey. “The fact that property prices in the area are not over inflated, with new-build units starting from just £30,000, means that an investment in property in Kusadasi is a safe one, as homes are not likely to fall in value.”
Golf is seen as a major catalyst for attracting more tourists and second homeowners to Turkey. With mass infrastructural improvements taking place and the prospect of up to 15 new local golf courses, Belek is a highly sought after area to own property.
Set in Turkey’s Antalya Province on the southern Mediterranean coast just 20 minutes from the Antalya international airport, this year-round destination offers a range of attractive beaches, as well as archaeological sites, such as museums and bazaars. New-build property in Belek currently start from under £60,000.
Although the overall standard of accommodations in Alanya, which is also situated in the Antalya Province, remains somewhat inadequate, attempts are being made to improve build-quality.
“We expect branded developers to start building property in Alanya City over the next few years,” says Ali Pusat of prominent construction firm Koray. “Alanya has the potential to replicate Spain’s property success, without the oversupply of homes.”
Koray has joined forces with developer BPI to build the Hill, located in Konakli, Alanya. Apartment prices at the hillside development, which will feature a selection of modern one to three-bedroom properties in Konalki, a stone’s throw from the beach, start from £89,000.
Amongst some of the other popular choices are: property in Marmaris, property in Fethiye, property in Dalaman, and property in Dalyan.
With a number of low-budget airlines now flying into Turkey, a burgeoning property market, a strengthening economy, and plans to join the European Union, the ingredients seem right to buy into Turkey’s residential property market – whether for investment or personal reasons.
However, despite all the positives, Turkey still lacks transparency. Tales of corruption and rogue housebuilders are not uncommon, and so it is necessary to approach any purchase of Turkey property with caution. Ensure that you seek independent legal advice and conduct appropriate due diligence before committing to buying a house in Turkey.
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