Turkey economy and real estate review 2014 and 2015

With US Federal Reserve signalling interest rate increases, Russian economy at a standstill, Brent crude below $60 per barrel and Eurozone still somewhat uncertain, 2015 is set to be quite an interesting year to say the least.   There are some global risks ahead as well as opportunities for the right investment pots.

Let’s have a look at how Turkish economy fared in 2014 against targets and what the year ahead holds in stock, particularly for the Turkish real estate sector.


Actual 2013
Final estimate 2014
Forecast 2015
Economic growth
Unemployment rate
Interest rates
US$ exchange rate
Current account deficit as % of national income
Budget deficit as % of national income
Global economic growth

Economic growth

BRICS Turkey GDP growth 2014

Economic growth of 4.1% achieved in 2013 seems not to have been exceeded in 2014.  The year started strong with almost 5% growth in the first quarter, however, weaker than planned domestic demand in the subsequent quarters of the year is set to end 2014 at around 3.5% economic growth.  This is far ahead of the Eurozone and higher than some of the BRICS (Brazil, Russia, India, China and South Africa), however, lower than planned for 2014.

Turkish central bank expects 2015 economic growth to be slightly below 4%.   The World Bank estimates Turkish economic growth for 2015 as 3.5%.

Unemployment rate

Unemployment rate is expected to reach 10% as the year ends.  Unemployment in 2013 was 9%, however, toward the second half of the year the rate started climbing up.  IMF projects 2015 unemployment rate for Turkey as 9.9%.


Government’s inflation target for 2014 was not met.  Impact of imports on the weakening Turkish Lira, coupled with price increases all across the board in the food sector pushed inflation over 8%, ending the year just under 9%.   Target for 2015 is 6%, however, IMF estimates are coming out at around 7% for Turkey.  Falling oil prices are in support of lower inflation in 2015, however, Turkish currency performing below expectations pose a risk for higher than targets for inflation in 2015.

Interest rates  

In February 2014, Turkish central bank had increased the base rate from 4.5% to 10% due to mounting pressures on Turkish Lira.  In May 2014, the base rate was lowered to 8.5% with further reductions signalled as were suggested in February when the major hike came into effect.  However, due to inflationary pressures mounting in the second half of the year, further reductions could not be implemented.  

As the year comes to an end, base rate appears to stand at around 8.5%.  With higher than planned inflation and continuing pressures on Turkish Lira, coupled with US Federal Reserve signalling interest rate increases for 2015, it seems rather difficult for emerging markets, including Turkey, to lower their interest rates.  

USD to Turkish Lira 2014 exchange

US$ to Turkish Lira currency rate

USD closed 2013 at around 2.15 Turkish Lira.  As Turkish currency started sliding significantly at the outset of 2014, Turkish central bank hiked up base interest rates to support the Lira.  This had the desired impact, however, only half-baked for the Lira never went back to its former levels to around USD to 2.00 Lira level.  Around spring and summer 2014, Lira maintained itself at around 2.10 against USD, however, by the end of the third quarter it had moved up to 2.25 again. 

Lira is expected to finish the year at around 2.30 level partially due to Russian crises, which had somewhat of an adverse impact on the Lira due to level of trade between Russia and Turkey.  2015 target was USD is around 2.40.


2014 is expected to end with an export level of $158bn against a target of $166bn.  The year started very strong in fact, with Turkey’s major export markets on the up and looking exceptionally healthy. However, Russian standstill, Middle Eastern crises and the Eurozone posting suspicious growth results had a negative impact on Turkish exports.   Nevertheless, although below targets, Turkey posted higher year on year exports in 2013 – 2014 period. 

Turkey’s export targets for 2015 are coming out at $173bn, which seems highly achievable given the strength and competitiveness of Turkish export industries.  There are external risks, however, such as the Eurozone economies, Russian crises and the Middle East.


2014 target year on year growth rate for imports was 4%, however, due to lower than expected exports and lower growth rate, imports fell below target closing the year at an estimated $242bn.  Government import target for 2015 is $258bn.

Current account deficit

In 2013 due to high gold imports, current account deficit had materialised as 7.9% of gross national income (GNI).   In 2014, current account deficit was managed down to around $46bn (year-end estimate), which is around 5.5% of GNI.  

2015 targets for current account deficit are somewhat variable for the government projects 5.4% of GNI, The World Bank predicts around 6% and the OECD estimates 5.1% for Turkey.   The variations are due to factors such as the world economy, Russian crises, oil prices and the like, which are difficult to budget for and have significant impacts on Turkey’s current account figures.

Budget deficit

In 2013, budget deficit was a comfortable 1.2% of national income.  This figure was not as easy to manage in 2014 given the background of less than target economic growth and lower tax collections as a result.  Final estimates for 2014 appear to be around 1.5%, although the gap to 2013 had worryingly widened up until the third quarter, only to be reversed in favour in the last quarter of the year.

Government’s target for budget deficit 2015 is 1.1%.

Global economy

Global economy had grown 3.3% in 2013.  Final estimates for 2014 are in line with the previous year.  With the Eurozone signalling an exit from recession, 2014 had an optimistic start.  However, this did not prove to last the year.  From spring onwards, major powerhouses of Europe started sending out conflicting and somewhat negative news with regards economic growth and prosperity across the board.

In 2015, although not without apparent risks, global economic growth is expected to be higher than 2014.  The World Bank’s estimate for 2015 is 4%, IMF forecasts 3.8% and the OECD expects 3.8%.  Eurozone recession, Russian standstill and the Middle East continue to pose risks for global economic growth.

Turkey real estate in 2014 and what to expect in 2015

2014 was an exceptionally strong year for Turkish real estate, particularly in major cities such as Istanbul, Ankara, Konya, Izmir, Antalya and the like.  Urban transformation projects, pioneered in Istanbul, completed and delivered tens of 1,000’s of new homes and there seemed to be no end to foreign investors capitalizing on Turkey’s property sector.

It is expected that Turkish real estate construction sector will close the year (2014) with 5-6% year on year growth, which is stable and consistent with the previous year and targets.  In terms of property sales by volume, 2014 has outstripped the previous year by almost 20%, indicating a very strong domestic demand and a real growth in new and second hand property segments.

Golden Horn panoramic apartments Istanbul

Some of the most notable observations of 2014 and 2015 beyond in Turkish real estate sector are as follows:

1.       Rising trend for quality constructions as opposed to standard buildings.  New projects launched in 2014 compared to previous years are notably higher quality and more comprehensive with notably higher prices per square metre, indicating a real price growth in the sector and demand for quality.

2.       Call for environmentally friendly buildings and eco technologies are on the rise.

3.       Urban transformation is gathering momentum in major cities, particularly in Istanbul.  This is giving rise to major face-uplifts on old historic town centres gone to disrepute such as Gaziosmanpasa in Istanbul, where volume of urban transformation transactions are the highest.  Other areas worthy of consideration in this regard in Istanbul are Bomonti, Sisli, Kagithane, Talimhane and certain parts of Fatih.   Similar high profile projects are ongoing in all major cities of the country.   By the year 2020, urban transformation targets to redevelop up to 350,000 housing units. 

4.       Branded projects are on the rise.  In Istanbul alone, 22 new housing developments will be launched in the first quarter of 2015 with 23,000 homes coming on the market for sale as off plan or new build units.

5.       Foreign direct investment from real estate investment funds is expected to accelerate in 2015.  This is partly due to the ongoing strength of Turkish real estate sector, which has been encouraging institutional investors since Turkey’s credit rating was raised to ‘good to invest’ grade, and partly owing to investors diverting real estate funds away from competing Russia.

6.       Following the abolition of the reciprocity law, which clears the way for previously disallowed foreign nationals to purchase real estate in Turkey, foreign investment has been accelerating since early 2013. In 2014, approximately $3.5bn of foreign direct investment in Turkish real estate was recorded.  This figure is expected to amount to $5bn by the end of 2015. 

Prepared by Cameron Deggin FCCA


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