We've come up with some predictions as to what will happen in Turkish property in 2017. From an increased domestic demand, to a continued fallout from a falling Lira, discover what's in store for a new year of Turkish real estate.
Domestic property demand will increase
Although tourism took a hit this year, property purchases have continued to climb, with 17% and 25% year-on-year increases in September and October respectively. This has been largely fuelled by local demand, which is set to increase next year. Encouraged by President Erdogan, commercial banks began offering cheaper loans, which has fuelled local property demand. 2016 has seen a 71% increase in mortgaged house sales, accounting for a third of all sales of villas and apartments in Turkey, and this is likely to continue through 2017.
Turks’ fortunes are also improving, with wages rising across the board - a hefty minimum wage increase is on the cards for early in the year, which will increase consumer spending and property ownership.
First-time buyers will be offered Turkish citizenship, work permits
The powers-that-be in Turkey have been talking about these measures for some time, and it looks like this is finally on the cards for 2017. At the moment, buyers are automatically eligible for one year of residency, with citizenship granted after five years of continuous residency. But in a bid to increase property sales to foreign buyers, the government looks set to ease the path to citizenship with the purchase of a property over a certain (as yet unknown) value. The same goes with work permits, which look likely to be granted under similar conditions. Real estate companies estimate that moves like these will generate billions in property sales.
The Turkish Lira’s loss in value against the US dollar will affect prices
The Lira’s loss of traction against the US dollar could drastically affect property prices in 2017. As of early January, developers have not yet increased their list prices to match the drop in Lira, representing huge bargains for investors. This discrepancy will no doubt be corrected within the next few months, with developers correcting by around 15% to match the drop in Lira. For now, the price difference represents a small, but significant, window for buyers.
Political uncertainty in Europe will push investors toward Turkey, especially Istanbul
In Europe, the UK, Germany and France account for 70% of property investment. However, these traditional European safe havens have experienced turmoil recently: Brexit threw the UK’s investment future into doubt, and saw London dropping out the world’s top 15 top investment spots for the first time in half a decade. France is facing turmoil with next year’s election and a possible swing to the right, which leaves the status of foreign investment uncertain. Germany has also faced ructions and will face an election next year. Turkey, despite the July coup attempt and some security concerns, remains a stable and viable investment option, with a steady growth rate of 4% predicted until 2020.
Middle Eastern investors in particular are moving into Turkey, specifically buying lifestyle and investment apartments in Istanbul. According to real estate services firm CRBE, Middle Eastern property investors spent around 30% less on global property this year due to uncertainty brought on by European political shifts. With the number of Arabs buying property in Turkey historically growing by 8-9% each year, it’s projected that this share will grow in 2017, especially in Istanbul.
Russian buyers will return
Property sales to Russian buyers tanked last year following a raft of sanctions against Turkey in retaliation for a downed Russian jet. As one of the sanctions was a ban on charter flights to Turkey, tourism was also greatly affected.
However, the sanctions were lifted in July, and Russian buyers are beginning to return. The beginning of the year will likely see a property sales surge as Russian buyers who had simply delayed their purchase come back to the market. Still more will be attracted by discounts from developers hit by the sanctions, who will be eager to offload the surplus units they’ve been unable to sell this year.
Russian buyers tend to stick to property in Antalya and Alanya, favouring one or two-bedroom apartments in large complexes near the beach. For now, the bulk of Russian buyers are lifestyle buyers, but an increasing number will also head toTurkey's largest city for Istanbul investment property opportunities.
Istanbul property sales share will increase
We can see how this trend has developed over the last couple of years:
2014 saw 214,569 properties sold in Istanbul, 5580 sold to foreign buyers.
2015 saw 239,767 properties sold in Istanbul, 7493 sold to foreign buyers.
Istanbul's population increased to over 15 million this year from 1.5 million in 1955. While construction is furiously underway in all parts of the city, and supply is improving, there is still not enough housing available to address the huge deficit in the city, which of course will continue to drive demand.
Infrastructure spending will increase real estate demand
On a local level, we can look at Bomonti, where prices went from $2000 to $5000 per square metre in a short space of time after the opening of two express road tunnels. Next year, we will see similar price jumps as metro lines continue to be built. The M7 line, which runs from Kabatas to Mahmutbey, will complete in 2018, and the Media Highway metro line will open in 2019. We expect investor interest in properties adjacent to these lines to peak next year, for example, the three developments you can see here are currently (as at December 2016) sold at off-plan prices ahead of or at the beginning stages of construction. We expect prices to rise significantly as infrastructure develops in these areas.
New centres of commerce will drive regional pricing
Two world class commercial areas are emerging in Istanbul, and as they develop these centres are driving property prices higher.
Atasehir, on the city’s Asian side, is set to become Istanbul’s “Wall Street”, with a large financial centre which will generate jobs in the tens of thousands. Construction here is fast and furious and investor interest is already high, with prices around $5000psm. However, as the area is still in its infancy, with completion set for 2019, we will see prices rise even higher as Atasehir becomes one of the most desirable places to live in the city. Investors wanting ground-level prices in Atasehir will find 2017 to be the time to invest.
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