Turkey’s economy has rarely left the headlines this year. At the beginning of 2018 the plummeting Turkish Lira made news all over the world, prompting concern within Turkey, as well as a wave of investment as foreign investors took advantage of their comparatively strong currencies to invest in Turkey's property. Erdogan’s approach came under fire, with commentators criticising his reluctance to raise interest rates to bring the currency under control. One of Erdogan’s economy-boosting measures was to lower the threshold for gaining Turkish citizenship by investment from $1m to $250,000, a move which also prompted a flurry of interest in Turkish property.
2019 looks to be just as exciting - and profitable - for anyone looking to invest in Turkey. We canvassed our consultants as well as Property Turkey director Cameron Deggin to take a look at the economic and property trends that will shape Turkey during 2019.
Despite lira fluctuations, the country’s outlook remains positive. Turkey’s underlying political stability and fundamentals tell a different story than the one portrayed in the media coverage. The economy, which grew by 4.4 percent this year, is expected to expand by 3.9 percent in 2019.
Let’s look at how other countries performed this year, and their expected growth next year:
- UK: 2018: 1.6%, 2019: 1.5%
- Germany: 2.5%; 2.0%
- Saudi Arabia: 1.7%; 1.9%
- China: 6.5%; 6.4%
- India: 7.3%; 7.7%
- Russia: 1.7%; 1.4%
- European Union: 2.1%; 1.9%
“Despite the doom and gloom surrounding Turkey’s currency crisis, this is just another storm to be weathered,” said Deggin. “Interest in property has remained steady simply because investors know Turkey’s fundamentals are strong, and everything will balance out.”
The trend for affordable luxury will grow
As well as driving the country's domestic mortgage market in their bid for home ownership, Turkey’s new, upwardly mobile young professionals are on the hunt for high quality rental homes. In response, a number of luxury-styled developments priced in the “affordable” bracket in areas like Eyup, Esenyurt, Beylikduzu and Bahcesehir are springing up, geared towards these young professionals - and in turn, to foreign investors looking for steady capital gains and reliable rental income.
These developments are priced competitively, making them ideal for investors seeking an entry-level investment that will appreciate nicely while earning steady rental income. And investors also have an assured exit strategy: in four or five years they will be well placed to sell to the young, Turkish professionals entering the property market.
Deggin says the affordable luxury trend shows little sign of slowing. “Around 200,000 people move to Istanbul each year, and a sizeable proportion of these are young professionals coming to the city for work.”
He said that there has been a shift in property expectations. “This demographic wants the bells and whistles. They're not content to settle for older, traditional developments like their parents might have. They want gyms, pools, shops, concierge services and metro connections. And developers have responded. Once, these facilities were only seen in the higher-end developments. Now, they’ve become the new normal in the affordable end of the market.”
What “affordable” means will change over time, Deggin says. “For 2019, we’d classify affordable luxury as any property falling into the $1300 to $1600 per square metre. However, with a projected growth of 30 percent within about five years, affordable luxury will look more like $1700 to $2100psm in three to five years time.”
Urban regeneration will continueBasin Ekspres or Eyup, go hand-in-hand with the affordable luxury trend, thanks to relatively cheaper land making these types of development possible.
Close to the city centre, with excellent travel links and significant infrastructure investment meaning quality hospitals, schools and leisure facilities, the city’s past success with urban regeneration will continue throughout 2019 and beyond.
Deggin points out an additional incentive for investors looking at regenerating areas. "Property in these areas is a mid-term investment, reaching its potential in three to five years. This fits in with the timeline of Turkish citizenship by investment, since investors are required to hold onto property for a period of three years before selling. So investors might as well make use of this period in high potential areas."
Bodrum will continue to shine
One major reason for Bodrum’s popularity is that it’s seen as a suburb of Istanbul, hence very desirable not only with foreign buyers, but with Turks. During the summer months, Bodrum’s population swells with wealthy Istanbulites travelling to the peninsula to relax. Many of these internal expats own summer homes down there, and with 95 percent of property transactions completed by Turks, these wealthy local buyers are helping keep the local property market and economy buoyant.
The beauty of Bodrum’s investment potential is thanks to its position, built on a solid bedrock of Turkish investment. Not only does this mean assured capital gains for buyers looking for a mid-term investment, but it also means an excellent exit strategy since there will always be local buyers looking to buy into the coveted Bodrum lifestyle.
More foreigners will gain citizenship in Turkey
Lowering the minimum investment required to gain a Turkish passport was a savvy move by the Turkish government, ensuring a new cohort of property investors.
“Right now almost 50 percent of our buyers are buying for lifestyle, and for a passport,” Deggin said. “It's big news. Once they reduced the citizenship to $250,000, the floodgates just opened.”
Read more: Citizenship by investment in Turkey
Deggin expects to see increasing numbers of investors from the following countries in 2019:
Buyers from the Middle East have steadily dominated the market over the past few years, particularly in Istanbul. A similar culture, short flight times and a steady political and economic situation appeal to buyers from Middle Eastern countries like Kuwait, Iraq, Iran and Saudi Arabia. With the added appeal of discounted citizenship on offer, these buyers will continue to buy up large in 2019.
The Chinese are relatively new in Turkey, but they’re investing with enthusiasm, Deggin said. Turkey is on the map in China, thanks to a huge Chinese investment in the One Belt, One Road initiative.
“In 2017 we had one Chinese client,” Deggin said. “In 2018 we’ve had 10, and next year we expect this number of triple, or even quadruple.”
China, with its population of more than a billion people, has a dynamic youth population who love to travel. This demographic is increasingly looking for new travel destinations, and for opportunities to invest outside their own country, Deggin said. “The Chinese are coming, and this isn’t a blip, it’s a continuing trend.”
Read more: Chinese investors eye up Turkish real estate.
The lira will continue to dominate headlines
“What will happen with the lira? It’s anyone’s call,” Deggin said. The currency has depreciated around 40 percent against the dollar since the beginning of the year. The Turkish government has put measures in place to shore up the currency: pledging liquidity for banks, and halting offshore currency swaps to stop traders betting against the currency.
Deggin has his own ideas. “I expect the Lira to follow its pre-2018 pattern, which is around 10-12% depreciation against the dollar each year, which is almost entirely offset by the rate of inflation in Turkey.”
However, it’s nothing the country hasn’t seen before, he said. “The issues arise when depreciation is unexpectedly high. We saw this in 2018, and we don’t expect it to happen again.”
Read more: Property enquiries triple as lira drops
Property prices will remain stable or go up
“Istanbul is a huge city with all kinds of properties for almost every budget,” Deggin said. “It’s common sense that they won’t all be good performers.”
On the south coast, where the market is dominated by foreign buyers, he expects prices to accumulate steadily.
“If you’re a lifestyle buyer, look to Kalkan, Alanya and Side depending on your budget, for bargains.”
The biggest gains over the coming years will be found in Bodrum and Fethiye, where what Deggin calls the “Turkish smart money” is channelled.
However, whatever the area, Deggin advises would-be clients to do their research. “No two properties or areas are the same. If you’re making a lifestyle purchase, that’s one thing - you're buying with your heart. But if you’re after a sound investment too, we advise plenty of due diligence, which is something we’re happy to help with.”
Lesser known destinations will get a chance to shine
Izmir This large city with its youthful, liberal population has become the centre of the country’s tech industry. Cool and buzzing, with lots of action, this modern city appeals to buyers looking for culture, a vibrant energy and great weather.
Bursa: The ancient city of Bursa is surrounded by forests and mountains, which are quickly becoming a target of buyers hoping to build their dream homes at an affordable price. An area of great natural beauty, Bursa’s lakes and ski fields are only now starting to gain recognition.
Read more: Why everyone's talking about Bursa
Turkey is a country that continues to surpass expectations, Deggin said. And although there have been a few surprises along the way for the economy, fundamentals remain strong. And the next year should be a good one - so long as you're paying attention, he said. "Invest smart. If you're looking to central Istanbul, stick to the affordable luxury sector and regeneration property. Or explore the idea of investing in new urban areas like Bursa, which are attracting a lot of interest."
With government incentives to purchase like citizenship by investment, Deggin expects foreign investor interest in Turkish property to grow over the next year.
"If 2018 has been anything to go by, 2019 is bound to be an exciting - and lucrative - year for our investors."
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