Posted on 14 February 2011
Turkey: To Buy or Not to Buy?
Property Wire’s global markets expert Liam Bailey gives us his view on the media-hyped investment ‘hotspot’ Turkey. Turkey is most certainly a current property investment hotspot. It is working towards EU membership and seeing massive levels of tourism. Visitor numbers are set to hit seven million this year.
EU membership has proven to be massively beneficial to property markets, as we have seen in places like Estonia, Romania and Bulgaria. But there is a lot of opposition to Turkeys membership within the EU most notably from France, Germany and Austria. Although talks are on-going an actual date for membership is several years away.
But the truth is Turkey’s property market is growing in leaps and bounds even without EU membership.
One of the great advantages of Turkish property I have found is that despite reported price rises of between 30% and 40% over two years in popular areas prices are still relatively low. This is especially so when compared to what could be called its regional rivals; places with similar climates and attributes like Spain and Italy. You can buy a two bedroom apartment in popular Dalaman for a little over £40,000.
Another advantage Turkey has over the two mentioned above, is that it is a much larger country and the government is acting early in its boom cycle to try and prevent over development and crowding in the most popular areas.
To do this the government is offering a massive incentives package for businesses to move into under developed and impoverished areas of the country, similar to designating Special Economic Zones as was done to great success in China and then India. Another benefit of this policy is that it will improve the distribution of wealth within Turkey.
Turkey also has excellent rental yields. The Global Property Guide puts average rental yields on small apartments at 8% throughout all districts.
But for me, EU membership is necessary to be sure of Turkey’s investment potential. I say this because investors have to be looking at who they are going to sell to in order to realise any growth their property has achieved.
Though Turkey’s economy has seen a solid 5% to 7% annual GDP growth over the past few years, this is expected to fall to between 3% and 4% this year. The budget deficit, which fell to 1.6% last year, is expected to grow to 3% of GDP in 2008 and 2009, with inflation rising to almost 10% on the back of rising food and oil prices.
Propertywire Liam Bailey 27 August 2008 (Abridged)