Urban transformation primes Istanbul for investment
Istanbul’s transformation from a modest metropolitan centre to a behemoth city home to around 17 million people has not been without problems. Rapid expansion, spurred by economic success, has meant shanty areas have developed around the city, with poorly built constructions that are susceptible to earthquakes and the elements.
Kentsel donusum, or urban transformation, aims to redress some of these urban issues. Although a large project like this one inevitably has its problems, the use of kentsel donusum to turn Istanbul into a truly global and prosperous city is considered essential by the government.
A short history of growth
The last few decades have seen two periods of significant growth in Istanbul. The first was in the 1980s, when privatisation and the removal of bureaucratic barriers saw economic growth soar and Istanbul’s population double in five years to just over five million. An urgent need for housing during this period was met by the subdivision of agricultural land at the city’s fringes. Buyers generally didn’t have a lot of money, so the plots were narrow and small, and the constructed houses filled these tiny plots entirely, resulting in dense urban structures. The vast majority of these dwellings were built illegally, but legitimised by the government in later years.
The most recent economic boom in Turkey occurred between 2000 and 2009, in part fuelled by Turkey’s integration into global markets and further boosted by the election of the ruling AKP party. Turkey emerged as a platform for manufacturing industries, and global investment flooded in. Major advances in public services and infrastructure (including roads, airports, railroads, hospitals, museums and universities) saw interest in the country grow and visitor numbers start to grow exponentially.
During this time the city grew from 8.8 million to 13 million. Istanbul saw a more measured, sustained growth during this period, with better planning and completed with the correct permissions.
Urban transformation - kentsel donusum
The government presents kentsel donusum as essential for Turkey’s economic growth, and most agree that many changes need to be made to help the city sustain further growth.
The kentsel donusum initiative began over a decade ago, aiming to redevelop the city’s shanty areas and develop infrastructure.
In 2012 the new Anti-seismic Law, which introduced new standards for construction and existing buildings to safeguard against earthquakes, saw the initiative gain momentum, allowing a way to begin transforming some of Istanbul’s poorer areas. It’s estimated that around 60 percent of Istanbul’s buildings are substandard dwellings (called gecekondu, which means “laid at night”). Over 20 years, the government is planning to demolish around 6.5 million risky dwellings to make way for better construction and infrastructure.
Kentsel donusum is happening all over the city, especially in inner city areas. In Fikirtepe alone, 50,000 housing projects are expected to be completed in the next three years, generating around US$15 billion for the economy. Fikirpete, on the city’s Asian side, is billed to be Istanbul’s Manhattan, and density will increase from 10 percent to 80 percent, creating homes for thousands of city dwellers. This is just one example - 15 areas of the city are tipped for kentsel donusum, transforming not only the way the area looks and who lives there, but the overall infrastructure.
While it has its problems (which we address below), urban transformation in Istanbul means neighbourhoods smarten up, becoming upmarket as wealthy buyers move in. This causes a boom in infrastructure and lifestyle facilities such as leisure centres, cinemas and shops, which in turn pushes prices up. Another plus is heritage safeguarding, with areas of historical significance preserved for future generations.
Urban transformation is starting from the centre and working its way out. The most central parts of the city, surrounding Taksim Square, historically a huge draw for wealthy investors, are becoming gentrified - or have already completed the process - conserving heritage and history by revamping older buildings, while introducing better infrastructure and cleaner, safer streets. Properties in these central areas are elite and luxurious, selling for millions of dollars to high profile investors.
Outside the centre, shanty areas are making way for modern, affordable developments in suburbs like Bahcesehir, Beylikduzu and Esenyurt, popular with buy-to-let investors and city dwellers looking for affordable housing a short commute from the centre.
With housing development comes the need for better infrastructure. Increasing road and air traffic has led to the construction of a third Bosphorus bridge and a third airport. It’s clear that Istanbul is crying out for better housing and better infrastructure to ensure growth continues in a sustainable way.
What urban transformation means for investors
Propertyturkey.com director Cameron Deggin lists his top picks for areas where investors can capitalise on kentsel donusum.
In Gaziosmanpasa, developments will change the face of this once shabby neighbourhood. Deggin says a number of new developments in Gaziosmanpasa represent an opportunity for investors to get in at the bottom floor.
“If you know the Istanbul property market even a little you’ll be aware that sea view apartments are as rare as hen’s teeth at this price, which is what makes these Golden Horn apartments remarkable.”
Deggin says that looking at areas where urban transformation has already taken place give a good insight as to how prices will perform in the future. He expects the price per square metre to increase by 50 percent within three years, and rental yields to exceed 7 percent in two years.
Over the next three years, Kagithane, in Sisli, will undergo massive change, with streets being regenerated one by one and infrastructure connecting the district to the central city. Around a quarter of Kagithane’s housing is to be replaced, accounting for about 45,000 homes. Many of these dwellings are being used to house the original inhabitants of the area, but investors are also buying up Kagithane developments at rock bottom off-plan prices, from as little as USD$100,000.
“For a savvy investor with vision, this is a superb opportunity to buy Istanbul property at an excellent price,” Deggin says.
Sisli’s old quarter is one of kentsel donusum’s great successes. A decade ago, the rundown area was neglected. Gradually, due to its central location and excellent travel links, Bomonti began to smarten up. When the Hilton moved in, building the largest hotel in the city, Bomonti’s fate was sealed. Now, prices are high - but still have some room to move, and will do so.
“Bomonti is a really interesting area, with a lot of character,” Deggin says. “It’s just a short distance from the central city which makes it very attractive to investors and residents. However, we’ve seen prices move up very fast here and most investors will soon be priced out of the area.”
Deggin says one soon-to-be launched will offer apartments starting at around USD$350,000 and rising to $1 million for higher floors. “There will be a serious opportunity to profit here as prices are certain to rise.” Deggin says more details about Bomonti Panorama will be released soon, and buyers wishing to know more should get in touch with him to find out about early deals.
Deggin also points out that buyers who purchase properties as buy-to-let investments will capitalise on rising rents in the city. “Looking at regenerated areas we can see that areas where urban transformation will take place will experience fast rental growth.” Deggin points out that in many areas already touched by urban transformation - and not just central parts of the city - have seen rental prices double.
The ethics of transformation
It’s inevitable that this kind of urban transformation will mean that commercial and collective interests intersect. While the process is certainly not unique to Turkey - we’ve seen similar urban transformation in most industrial cities across Europe and the US - the speed at which the developments are taking place has been of concern to many, as is the environmental factor, which the government needs to be aware of. The northern part of the city borders vast forests, which are now under threat.
The biggest ethical challenge kentsel donusum faces is the displacement of the gecekondu dwellers. While the owners are compensated or in many cases rehomed, it’s unlikely that everyone will receive the correct compensation. These residents, many whose families have lived here for generations, will unlikely to afford even a modest apartment on the city’s outskirts. Critics have voiced concern that kentsel donusum will merely make money for developers and the country’s elite, further widening the gap between rich and poor in a country that should be endeavouring to raise the standards of its poorest.
A further issue is the pressure exerted on gecekondu dwellers to sell their homes. Although officially developers need the agreement of two-thirds of homeowners in each area, pressure by the government means that many citizens are being evicted to make way for developments.
While urban transformation has its problems, it’s clear that Istanbul will need better housing and infrastructure if it needs to grow. The hope is that the transformation is sensible and sustainable, and will cater to every resident.