Posted on 23 March 2012
It really is a special time to invest in Turkish property. We can say that and you have every right to call us biased. However, I would challenge anyone, impartial, unbiased or otherwise to question our reasoning.
It is like a perfect storm. A storm that has been brewing and building since 2002 and is now unleashing its full force behind Turkey, propelling it forth as one of the top places in the world to buy property.
The Storm Gathers from Early Beginnings
Like a drug addict needs to hit rock bottom; Turkey was on its knees in 2002, the sick man of Europe down with another bout of depression. The people said enough to corruption and fraud fuelled inflation and the boom bust cycle when they elected the AK (Freedom and Justice) Party, which promised to end the military’s involvement in government (which was behind much of the corruption, sweet contracts to businesses owned by general’s brothers etc), to end fraud and ultimately to stabilise the Turkish economy.
Two successive re-elections with an increasing majority both times says that they are achieving these aims. Perhaps more than the facts like Turkish public debt down from 74% of GDP in 2002 to 39% of GDP in 2009 and debt to the IMF down (from $23.5 billion in 2002 to $7 billion in 2009). The AK Party also overhauled the banking system, making many of the reforms western banks were forced to during the financial crisis.
Turkish GDP then grew by an average of 6% per year between 2002 and 2007, which was “one of the highest sustained rates of growth in the world” according to the source of the figure the US State Department. The economy then grew by just 1.1% in 2008 before falling into recession with the rest of the world (almost anyway) with a 4.7% contraction when the financial crisis hit home in 2009.
The Storm Builds in Turkey’s Recovery…
But it is in Turkey‘s recovery from the crisis along with a whole host of other factors that create such a special environment for investment. Turkey’s banking system emerged from the crisis as one of the strongest in the world. Liquidity was high and Turkey was able to reduce interest rates, not only as a knee jerk stimulatory measure, but as a measured policy response to falling inflation over the last few years of careful economic management. This gave investors and businesses confidence that the rate wouldn’t be jerked back up just as quickly anytime soon.
As a result Turkey propelled out of year-long recession with a 6.4% year on year growth in the final quarter of 2009. This was followed by a period of double digit growth in the first half of 2010. Growth then slowed and Turkey finished 2010 with GDP growth rate of 8.2%. Growth then accelerated again last year, when 11% GDP growth in Q1 made Turkey the fastest growing economy in the world, and a growth of 10% for the first half of the year kept this record intact. A final figure for 2011 hasn’t been revealed yet, but we know it will be a good one.
And this is the part of the perfect storm now bearing its full force behind the Turkish investment package. From the policies started in 2002 and continued over the last 10 years Turkey currently has a strong and stable banking system and a stable economy which is growing strongly. As a result of this strong basis, we have a whole host of other reasons why Turkish property investment is currently such a hot prospect.
Other Forces Become One with the Storm
Turkey has long had a rapidly growing population, but now that population is growing as rapidly in affluence as it is in number. We have significant migrations from rural areas to take up the employment growth in the cities. This is fuelling demand for properties to buy and rent, demand which developers say is far greater than they can keep up with.
And it doesn’t stop there. Turkish tourism has also continued to grow during the financial crisis and has since accelerated. This is thanks in no small part to a series of visa free deals agreed by the Turkish government with many countries including Portugal, Lebanon, Albania, Syria, Jordan, Libya, Kosovo, Seychelles, Ukraine, Cameroon and more.
Take careful note of Lebanon, Syria, Jordan and Libya, as these agreements could now help to fuel a new surge in the storm. This is because Turkey is now considering a bill to allow all foreigners to buy, whereas before many nationalities, including many in the Arab world were stopped by reciprocity in Turkish foreign ownership laws. Currently only foreigners from countries that allow Turks to buy can buy in Turkey, this means people from many Arab countries can’t buy in Turkey, but if the bill is passed they soon will be.
And this will come just after the Arab Spring has caused a surge in Turkey’s popularity in the Arab World and Turkey agreed all those visa-free deals with Arab countries — you can see the perfect storm analogy right?
Arabs and Muslims prefer to holiday invest in other Arab and Muslim countries. As the Arab Spring made many such countries un-conducive to things like family holidays and investment, Turkey has seen a surge in tourism and investment from the Arab World. If Arabs are indeed allowed to buy property in the near future, experts predict the emergence of a multi-million dollar market.
And this on top of the storm laid out above already raging behind Turkey as a property investment destination. It really is a special time to invest in Turkey.