For Turkish property investors, the last decade has certainly been an interesting one. Economic gains, currency woes, elections and an attempted coup. However, despite setbacks, Turkey's economic fundamentals have been sound, and investors have won fortunes, especially in the high-stakes market of Istanbul.
In this chapter of Straight Talk, Property Turkey director Cameron Deggin looks to the future, examining Turkey's fortunes in 2020 and beyond.
Positive growth ahead
Last year, Turkey's economy beat expectations - the International Monetary Fund prediction was -2% - by expanding 1%. This year, it's set to grow further, with an IMF prediction of just over 3% expansion.
"This is rather promising," Deggin says. "If you consider Turkey as a developed economy, 3% GDP growth is actually not bad at all."
It looks even rosier when compared to the EU growth projection of about 1.5%, Deggin points out.
"Only 18 months ago, there was a 29% devaluation in the currency. Moving from that to a 3% GDP growth underpins that the Turkish economy has some strong fundamentals.
"It's rare to bounce back like that following a currency devaluation."
Interest rates will fall
Following "chaos" in 2018, when the Turkish Lira spiralled out of control, interest rates shot up, Deggin says.
"To address a rapidly devaluing Lira, the Turkish Central Bank took action by raising interest rates. This move stabilised the currency, but also meant slower growth."
To put it into context, before the currency drop, interest rates in Turkey were around 8%. At the beginning of 2019, they were sitting at 25%. This had a drastic effect on the domestic property market, which accounts for 95% of real estate transactions, Deggin says.
"As you can imagine, the domestic market came to a standstill, except for opportunistic, cash rich investors. Overseas investors came and took advantage of some very good opportunities on our advice."
However, by the end of 2019, the rate had dropped to 13%.
Deggin predicts this figure will fall throughout the year.
"My projection is that by June, we'll be back to 8.5%. Which means the Turkish domestic market will almost certainly start coming back. Maybe not to the level of three years ago, but you'll see a noticeable increase in the number of Turkish investors and more importantly, Turkish home buyers."
The change was already apparent at the close of 2019, he adds.
"The average shelf life of properties in our portfolio went down from eight months to four months."
Deggin suggests property buyers make their move sooner rather than later.
"If you're an investor looking for good opportunities, act in the first quarter of 2020. After the halfway mark, there will be am much more active Turkish market."
Citizenship by investment program will shift goalposts
Another effect of Turkey's currency crisis was the lowering of the Turkish citizenship by investment threshold.
Before 2018, investors could gain citizenship with a $500,000 investment in property. But to attract much needed income, the government dropped that threshold to $250,000.
Deggin expects these conditions to change.
"The government is under immense pressure from the opposition party to stop it altogether. What I expect will happen is the level will move from $250,000 up to $500,000. This will carry on for another 18-24 months, and then I expect it to be abolished."
Looking at the figures, citizenship by investment generated a little over $3bn for the economy, Deggin says.
"For an economy worth something like $850-900bn, $3bn doesn't sound a lot. But another 24 months and the $3bn will make its way to $10bn."
However, with an election looming, the government will bow to pressure to abolish the programme, he says.
"In 2023 there will be an election. So the government will almost certainly put a stop [to the programme] before the election."
Istanbul's mega projects will ramp up
While progress on Istanbul Finance Center, situated in Atasehir, stalled in 2018, work is now continuing at pace and is predicted to complete in 2022, Deggin says.
"Currently the financial heart is located in Sisli, Maslak - the European side of Istanbul. These areas are old, tired and cumbersome."
What's more, traffic in these central areas is often gridlocked.
"On an annual basis, cost and time and money are wasted because of traffic.
The new finance centre, on the Anatolian side of the city, will house some of Turkey's largest institutions, including the Turkish Central Bank. The centre will become a more efficient economic hub, he says.
While work slowed in 2018 due to the economic slowdown, a capital injection from the government has kickstarted the project.
"Work is underway, at full speed. Most stages already completed. In the middle of it you can see the names of the Turkish Central Bank, and other big banks' names already on the towers. It is happening."
The hub is already changing the fortunes of surrounding areas, with property prices climbing steeply in Atasehir and other suburbs.
Talk of the much touted Canal Istanbul, on the other hand, should be taken with a grain of salt, Deggin says.
"I am not too optimistic as to its viability anytime soon, so take it with a pinch of salt. Listen to it, laugh at it and move on. It's been talked about for 30 years, each time there's an election and votes need to be galvanised it's raised."
The ambitious project has its pros and cons, he adds.
"But the feasibility and viability of project in the near future is highly unlikely. So any purchase decisions, don't make them with Canal Istanbul in mind. Five, 10 years down the line when it doesn't materialise, you might regret that decision."
The trickle of Chinese buyers will become a flood
More and more Chinese investors coming to Istanbul. This is happening very fast. Two years ago you wouldn't see any Chinese home or investor buyers. Now every months we have Chinese clients. We are closing deals. From nothing to a noticeable number. I think 202 we shall see further increase.
Watch out for our travel show which will be hosted by an American Chinese actor, fluent in Chinese and he will be doing this travel show for Chinese audiences to be aired in China.
European interest will increase
Following 2016's attempted coup, British buyers shied away from Turkey. However, with the country experiencing political stability, as well as being one of the only currencies that is favourable against the pound, UK buyers are once again turning to Turkey.
"It's the paradise coast," Deggin says. "The most precious areas of Turkey, attracting huge foreign interest."
"When the European economy is faring better, when there's optimism, when there's cash in the pocket ,people buy on south coast in Turkey as they find excellent value for money."
This year promises more interest for these areas, Deggin says.
"Look out for Brits: with Brexit on the horizon Spain, Italy, Greece, will no longer be in the same club."
For British buyers, Turkey will be seen on a par with Spain and Italy, but with a massive cost advantage, he says.
"British buyers are traditionally in love with places like Kalkan, Fethiye, Bodrum and Kas - we'll see more of them on the south coast."
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