Port renovation projects fueling real estate boom in Galata

Published 18.10.2010 00:18

After nearly a half-century of eclipse, real estate prices in the historic Galata neighborhood in Beyoğlu have been climbing again. Its fancy buildings, which have been undergoing modern renovations, are being snapped up by artists, intellectuals, foreigners and more recently by big conglomerates at astronomic prices, promising that the area is about to return to its heyday.

After nearly a half-century of eclipse, real estate prices in the historic Galata neighborhood in Beyoğlu have been climbing again. Its fancy buildings, which have been undergoing modern renovations, are being snapped up by artists, intellectuals, foreigners and more recently by big conglomerates at astronomic prices, promising that the area is about to return to its heyday. For experts, the major factor driving the prices up is the prospect of a new tender to restore the historic port site in the district, which is expected to cost several billion dollars.

"The interest in Galata is not entirely new. It dates back to the mid-1990s," says Şahin Kargir, owner of Horasan Emlak, a real estate agency operating in the neighborhood for the past decade. "What is new today is the change in the investor profile," Kargir argues, "as the rise in the market for real estate in Galata came into the spotlight, wealthier people also flocked into the area to invest."

In line with Kargir's point, Galata has recently seen a number of well-known figures from business investing great amounts of money in its real estate market. Faruk Eczacıbasi, vice president of Eczacıbasi Holding, a leading pharmaceutical company, purchased a six-floor building just across from the Galata Tower. Ferit Şahenk, the chairman of Doğuş Holding, followed him by paying TL 8.5 million for the building next to Eczacıbaşı's in May. Last month Kerim Kamhi of Profilo Holding also joined them and secured the ownership of the famous Doctor Kastro Apartment for $3.5 million.
Even the catastrophic global financial crisis that shook 2008 and 2009 to the core, with the real estate sector suffering the worst, was not enough to curb the rise of property prices in Galata. Kargir reaffirmed that the crisis had only a minimal effect on area real estate prices, except for a slight slowdown for a short while. ARABASLIK Decline and rise of Galata

Once home to rich bankers in the late 19th century, Galata suffered a dramatic deterioration in the middle of the 20th century. After the former wealthy inhabitants of the neighborhood left the area for various reasons, it became a magnet for poor families migrating from Anatolia. Lacking any repair or restoration all this time, the tumbledown buildings of Galata, despite their magnificence and glorious past, were left to their destiny with no one finding it safe to wander through the streets.
This situation changed noticeably in the 1990s when an enthusiastic renovation project kicked off in Galata. Streets were paved with bricks, an alluring square was built around the majestic tower, historic buildings started to be restored to regain their glory days and chic shops opened their doors to serve a new customer group, which has gradually evolved into an increasingly upper income class. According to data from the İstanbul Chamber of Commerce (İTO), the number of firms operating in Galata more than doubled in the past 10 years.

This, simultaneously, resulted in a striking increase in demand for housing in the area, as well as a remarkable price surge, a natural outcome in compliance with the rules of economics. The local realtors say that one who is willing to live in the area now must be prepared to sacrifice around $1 million to own a decent house or to pay thousands of dollars per month in rent. All of these figures are huge compared to the low housing values, sometimes not much more than a decade before.

But how could such a change take place that rapidly? According to Vildan Şelale, owner of Falls in Galata, a real estate agency in the neighborhood, the long-awaited Galataport project is the most important factor driving prices exponentially up in the neighborhood.

A tender for the project was held in 2005, with a consortium led by Royal Caribbean emerging as the winner with a bid of $3.54 billion. However, the tender was scrapped a year later and plans to organize a new tender are still alive, albeit unlikely to happen very soon.

Also known as the İstanbul Salıpazarı Port, the port is of great importance for the country's economy as it is the only cruise port Istanbul has. If the project gets completed, it is expected to raise the number of tourists to Istanbul by five to sixfold, with predominantly high-income groups, which in turn is likely to contribute to further development of the district.

Strengthening democracy key for development

Moreover, Şelale points out that improving democracy and economical stability in Turkey are also other reasons adding to the increase in the neighborhood real estate, particularly for foreigners. "Galata is almost a miniature of the history of the Republic of Turkey. If its real estate market has recently been on such a rise, it is also because of the enhancements in the country's democratic rights and freedoms," she says.

The interest of foreigners in Galata is in fact of special importance considering that the residents of the neighborhood used to be mostly non-Muslim minorities in the past. This situation changed in the mid 1900s with the implementation of nationalist policies and infamous incidents that led to the persecution of local occupants.
Ali Hepşen, an economist from Reidin.com, also confirmed the rising demand for real estate in Galata from several foreign firms, especially from the UK.

Attracting huge investments

Despite the significant increase in the value of real estate in Galata, there is a shortage of accommodations for tourists, with only a few guesthouses; however, this deficiency is likely to be filled by the famous Richmond Hotels chain.
Recently, the Aksoy Group, the owner of the chain, announced that it is planning to build a five-star hotel in the neighborhood, just opposite the Galata Tower. Projected to have 185 rooms in two blocks, the hotel will be constructed on a 600-square-meter plot of land at an estimated cost of around $50 million. The group started to acquire parcels of land back in 1995. As parcels of land in the area are extremely small and generally have multiple owners, it took some 15 years before they finally reached the required size for the project.
"We foresaw at that time that Galata would eventually achieve the value it deserves," Oktay Orhan, board member of the group, said in an interview with Sunday's Zaman. "When it starts to operate, its impact on the area will be huge, maybe as huge as Galataport," he predicted.

The construction of the hotel will start immediately after it receives approval from the relevant authorities.

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