Turkey property safe haven for GCC buyers

Since the relaxing of foreign nationals real estate buying regulations, Turkey property makes very strong case for investment in the GCC and Middle East markets. The following are among the main reasons cited for the recent increase in GCC and Middle Eastern nationals investing their money in Turkish real estate as opposed to other overseas property markets.  

Property Values and Rental returns

In 2012, Real Estate in Turkey was motivated by changes to the foreign property purchase laws, which provided new opportunities to particular nationalities, including UAE, Kuwait and Saudi Arabia. This was seen as a direct invitation to overseas investors from these countries who are viewing Istanbul and Bodrum for the first time. It has also been announced that residence permits for foreign buyers, currently issued for 3 months terms, will be extended to 12 months.

Real estate in Dubai has and still is, reaping the advantages from the exciting investment flow of the Arab Spring. This was created by investors seeking a safe haven for their property assets. However, developers of Real estate in Turkey would like to change the course of the flow from only one direction, which is towards Dubai! 

Following the Bill coming into effect in May 2012 that removed the condition of reciprocal sale of land sales; about 19,000 properties were purchased by foreigners in Turkey in the period June 2012 to January 2013 alone. A report from a Turkey property developer, Vedat Asci, the chairman of Astas Holdings, indicates that during May 2012 foreign acquisitions attained $1.1 billion, quadrupled from the 2011 total. He has expressed his intention of presenting new projects to prospective investors from the UAE. 

GCC and Turkish Influences

GCC investors have traditionally had a strong influence on the property market in Lebanon during the periods of strife in that country. Taking into account the seriousness of the situation in Syria, property investors in the Gulf are considering the potential consequences of Lebanon as a mid-term investment source. Therefore, any initiative on the part of Astas Holdings into the Gulf could also have various influences in Lebanon.

Against this background, the most recent benchmark study on property worldwide has been identified by IP Global, which gives a top listing for Istanbul. It states the prospects for the city as being “bright”, which places it on the same level as London, Berlin and Munich. This is in comparison to Paris, Zurich, Hamburg and Stockholm which have been given a rating of “fair”.

Although London and Paris retain their positions as prominent investment havens, the real estate markets in Germany are operating in a diverse economy with a rapid growth factor in the population.  One of the outstanding positive developments in Europe has been seen in the Turkish economy, which could achieved a GDP growth rate in 2012 of almost 4%. This is further supported by data from real estate sources that Turkey property values are gaining, especially in Istanbul and Bodrum, helped by the greater flexibility in the mortgage market. Therefore, Istanbul is considered a market with strong economic potential, confirmed by the continued setting up of bases in the city by international companies.

Arab Investors for Istanbul

Arab investors buying property in Istanbul perceive the city as another London scenario. This has been brought about by the Turkish property laws being revised in May 2012, which abolished the rule allowing property investment only from those countries that offered Turkish nationals similar facilities. The innovative bill also permitted the government to double the amount of land from 300,000 square metres to 600,000 square metres available for purchase by foreigners.

The property prices in Turkey are providing added incentives for the Arab investors, by having achieved the third rated fastest growth record in the world real estate market. This follows the performances of Brazil and Austria and was induced by a surge of over 10%. This factor when coupled with the relaxing of the property laws for foreigners is motivating high expectations in the Istanbul property environment. It is further anticipated that the performing Istanbul market will favourably compete with the newly formed popular property focal points, for example; Moscow. It is here that the prices of prime real estate now rival those of London and New York.

Balancing Caution with Motivation Factors

While property in Turkey is generally regarded as being attractive to investors, stimulated by the continued and rapidly rising prices; it is this factor that has raised some caution in investment funds. It is related to the luxury sector and the potential risk of the “bubble” factor, which has been experienced in other countries. The returns being shown from rental property in the luxury market is a relatively modest 3% to 4%. However, analysts do not expect a dramatic fall in real estate prices. Low leveraging would offer owners the opportunity to contain their property assets and limit “fire-sales” should prices start to fall.  

Although Turkey is frequently viewed as a safe haven in the region, its closeness to Syria could create some concern for Arab investors buying property in Istanbul. This is enhanced by worldwide economic concerns that could make investors cautious about those emerging markets with a higher risk factor. A more positive aspect is provided by BofA Merrill Lynch, whose analysts reversed their previous negative position regarding real estate in Turkey. This was on the basis that lower interest rates and a determined demand for new projects would assist the market sector in the future twelve months. 

Exciting Investment Opportunities

In many instances, there is little doubt that Turkey and especially Istanbul has an exciting and attractive real estate investment potential. It was announced recently that an influential property developer from the UAE could invest $700 million in a housing project in Istanbul. Regardless of the perceived downturn in various economies and the impact created on investors, there are markets with potential for growth and returns from rental property.

With wealthy oil investors from the Gulf and Russia flooding to the Mediterranean coast, it does seem that Turkey, with its changes in property laws for foreigners could be seen as a potential investor haven. It is anticipated that the initial impetus would be towards the tourist resorts and then other major cities.

The emergence of Turkey from the economic downturn and the manner, in which it was achieved, inspired property investment experts to identify potential opportunities such as Istanbul.  For investors seeking a relatively quick return on their investment in property, the general indications serve to confirm that Turkey was the right destination.