Turkey’s growing, newly affluent population needs housing, which foreign investors can help provide
Turkey has appeared on investors’ radar screens. Over the past couple of years, the country’s property market has quietly amassed credibility as a target for a growing amount of domestic and international investment, because of Turkey’s revitalised economy, its appetite for foreign influences and its importance as a tourist destination.
Add to this population growth and a hunger to obtain EU accession and you now have the key ingredients for a booming investment market.
In the past 12 months alone, Istanbul has seen unprecedented levels of foreign investor interest. Three of the city’s top five mixed-use property transactions have been completed with the help of some form of overseas interest. Ankara, the country’s capital, has also benefited from high levels of demand a number of large-scale residential opportunities in the city are being made available for overseas development or partnerships.
Growing demand for homes
By 2010, Turkey’s residents will demand 7.3m homes. Thus there is a great need for development and foreign investment has proved able to help meet this need.
Istanbul, with a population of around 16m, has been the focus of many of these partnerships. Within the Besiktas-Sisli region alone, more than 15 residential development projects are under construction. These will provide more than 5,000 apartments during the next five years. This is a welcome start, but it is still well behind demand.
Partly because of Turkey’s housing shortage, the government has made it easier for foreign money to enter the market and most Turkish banks are now offering competitive terms on construction loans and debt financing. On the micro side, the country’s establishment of a new mortgage system should allow banks to grant residential loans with variable rates and extended loan periods.
These measures are expected to have a dramatic impact on the housing market, which will require more than 400,000 new homes in urban areas each year. Add to this demand Turkey’s low rate of home ownership, 40%, and small residential loan market, accounting for only 3.9% of GDP in 2006, and it is easy to see that there is room for growth.
Stable environment for investors
The Turkish government’s reforms offer residential investors a stable environment. However, as with all developing markets, the first ones in will snap up the best opportunities.
One main item consistently tops most residential investors’ wish list: forming strong local partnerships with Turkish companies. Foreign investors inevitably have a certain degree of trepidation when they enter a new market and they will need guidance on Turkey’s planning and construction laws, mortgage structures and other relevant legislation.
It is therefore understandable that Western companies should wish to link up with local companies, not only to gain access to the best assets, but also to benefit from local knowledge and expertise.
In return, local companies are opening their doors to foreign investment as they realise the benefits that such partnerships can yield.
