Turkish Govt Takes steps to Boost Economy, May Weaken Lira/Boost Property Market

Posted on 04 June 2009

The World Bank is to loan $6.5 million to Turkey, some of the loan will be used as part of the government’s initiative to increase employment in the south east of Turkey. Also this week, Turkey signed a free-trade agreement with Serbia, which will massively increase trade between the two countries.

Though there is no direct link between these events and the property market, a healthy economy should be a precursor to any overseas property investment, as a strong internal housing market provides a viable exit strategy for overseas investors.

On top of that, the government’s strategy to boost employment comes after warnings that the government should avoid unchecked spending, which threatens to put upward pressure on inflation and public debt, and thus decreases investor confidence in the country. This will likely cause the Lira to continue falling in value against the British Pound, and continue to make Turkey property cheaper to British buyers. Turkey property is already about 20% cheaper to British buyers than it was a month ago, thus Turkish property has a large instant equity advantage. As a result it is attracting a lot of attention from British overseas property investors.

The government’s new strategy to increase employment, includes:

  • cutting corporate taxes from the current 20% to between 2 and 10 percent depending on the local region
  • guaranteeing loans on behalf of small and medium-size businesses
  • benefits for large investors

The free trade agreement is to be mainly beneficial to Serbia, as the deal would be implemented in accordance with an ‘asymmetric trade liberalisation model’ favouring Serbia, and because it is part of Serbia’s wider economic strategy of signing trade agreements with as many countries as possible.

Serbia plans to export all kinds of industrial products under the deal, while Turkey plans to focus on Serbian agriculture, textile and metallurgical sectors.

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