Forget a place in the sun: investors need to get serious, explains Cameron Deggin

While many people think of Turkey as a holiday destination, if you’re serious about investment you need to get out of the place-in-the-sun mindset and look to the areas where internal demand is driving prices, explains Cameron Deggin.

Foreign demand for property in Turkey can fluctuate, which is why it's important to focus on areas where internal demand is strong. I'm going to discuss the two premier investment areas: Istanbul, and Bodrum, and explain why each is a good investment, and where investors should focus. 

Istanbul

Turkey’s largest city has a population of 15 million people and is the country’s economic powerhouse. There’s a significant shortage of quality accommodation in the city for the fast-growing middle class. When you consider that 60 percent of the population is under the age of 32, you can appreciate that this demand is only going to increase in the years to come.

Middle class earning power is also growing by around 10 percent each year, which translates to a GDP growth of around 10 percent in this demographic. Compared to the Eurozone this is phenomenal growth, and of course this also has a huge impact on the local housing market.

If we look at Istanbul, there are several areas that are prime for investment.

Urban regeneration areas

These inner city locations lost their appeal over decades due to the shabby housing and industrial aspect. The industry has now moved out and there is huge investment going into the local infrastructure. Quality residences are being built, which are attracting professionals looking for affordable homes. Inevitably, as the profile of these areas increases, so do prices. A few areas you could look at are Eyup, in Istanbul’s historic peninsula, Gaziosmanpasa and Bomonti. Bomonti in particular is a great example. Ten years ago Bomonti had a reputation as a ghetto, with shanty homes and unsafe streets. A decade later and this central city area is unrecognisable: it’s now home to Europe’s largest Hilton Hotel and some of the city’s most luxurious residences. The streets are not only safe, they’re host to a very fashionable set of restaurants and clubs, and lively bazaars. In ten years, property prices have tripled, making significant gains for early investors. However, as Bomonti is still priced 50 percent lower than property in neighbouring Nisantasi and Osmanbey, there’s still plenty of room to move we’re expecting great things - and exceptional profits - from this central suburb.

One Bomonti development in particular is proving popular with investors. It’s a luxury hotel-style freehold residence, with each of its 85 square metre apartments enjoying access to five-star hotel facilities - right in the heart of Istanbul. Prices start at around £250,000 and I expect they’ll hit the £500,000 mark in around five years time. Investors will also earn 6 percent rental income right off the bat, making this a very smart Istanbul investment.

International Finance centre in Atasehir

Property prices in Atasehir have outperformed all expectations. Since 2011 the average property price appreciated by more than 100 percent - and they’re still rising. The chief factor driving prices up is the new financial centre, which is set to house Turkey’s major financial and legal organisations which until now, had been scattered around the city in areas such as Mecidiyekoy, Levent, Sisli, where traffic problems could stall you for hours during peak times. 

The International Finance Centre will create something not unlike The City of London, but with better infrastructure and a larger capacity. As the very centre of this development Atasehir will reap the associated benefits. The area already has links to the metro and top facilities, including private schools hospitals and leisure facilities.

Suburban Istanbul 

Prices are generally much more affordable in suburban Istanbul. There’s one area I would recommend for future investment and that’s Bahcesehir, on the western side of European Istanbul. Known as the Garden City, Bahcesehir has extensive green areas, lakes and parks and a well-planned residential profile. It’s being developed as an elite, green suburb for city professionals to enjoy a life away from the inner city hustle and bustle.

Prices are currently very affordable. However, with a metro station due to open in 2018 and commuting to the central city becomes faster 30 minutes, as opposed to current times of over an hour - prices will increase sharply. Bahcesehir will also be connected to Istanbul’s new airport by a major motorway, which will allow travel of 20 minutes.

There are a number of affordable projects currently under development that I’d suggest investors explore. The government has a stake in some of the development, ensuring extremely low risk and a cap on prices during the development stages. If you’re focusing on speedy capital growth over the next three to five years, Bahcesehir is definitely worth a look.

Bodrum

Bodrum has always been a tourist destination, and the peninsula is more popular than ever with foreign visitors. However, as well as being an attractive spot for overseas visitors, Bodrum is also the holiday destination of choice for well-to-do Turks, who own a significant proportion of the luxury homes here.

Recently in Turkey there’s also been a shift in the attitude to work, and the number of people who work from home is growing. When you add increasingly frequent flights from Bodrum to Istanbul to the mix, you get a growing population of Turks who are moving from the city to Bodrum to live and work.

These factors have contributed to a demand for quality homes in Bodrum, and because the demand is internal it means investors are protected from the vulnerability to changes in foreign buying trends. So for a viable investment land and property in Bodrum is a smart idea for sure.