The Investment Office of the Presidency of the Republic of Turkey announced that Turkey has been one of the fastest recovering economies in the world, expanding at a staggering 21.7% in the second quarter of 2021. In this context and especially taking a look at investments, let us start by saying that complaints and concerns can be heard everywhere around the world about a continued downward spiral with regards to attracting overseas investors, of course, no surprise during a pandemic. However, one country and for today’s brief analysis one sector in particular completely reversed this trend: Turkey and its property market.
A bold statement like this needs to be backed by data and facts. According to a group of experts behind a big international investor conference scheduled for spring 2022, Turkey’s property market is booming and has shown no signs of slowing down during the COVID-19 situation. On the contrary, many investors looking for an escape from major European and Middle Eastern cities ended up in cities like Bodrum, ensuring that the region had one of its busiest investment summers on record.
Originally planned for September, the event has now been moved forward to May next year as by then the risk of any coronavirus-related travel restrictions is expected to be zero. At stake: building on the country’s on-going success with regards to individual investors and adding a new dimension – allowing for a large number of investors to come together in the same conference hall and exchange views and opinions (and one feels inclined to write, hopefully at a later stage returning to Turkey exchanging monies and keys, too).
And it is an entirely private initiative that merits applause ever more so as many of us are still somewhat hesitant before boarding a plane to a foreign destination. We shall come back to that venture toward the end of this contribution. First though: a little bit of number crunching!
Perfect return on investment
Lalaine C. Delmendo compiled an amazing array of Turkey-related data for the Global Property Guide published on May 18 of this year, titled "Turkey: a crisis and maybe an opportunity." The author approaches the topic from a return-on-investment perspective and states that nationwide house prices in Turkey saw an increase of 30.6% in quarter one of 2021 (versus only 15.1% in the first quarter of 2020) with an average of just over TL 4,000 ($432) per square meter, Delmendo lifted these figures from the Central Bank of the Republic of Turkey (CBRT). One must of course add the inflation adjustment into the mix – nevertheless this inflation-adjusted figure amounts to a net increase in value of 13% in 2021's first quarter. This represents the strongest growth over the span of an entire decade.
Interestingly enough Izmir on Turkey’s west coast witnessed an almost 40% increase in house prices compared with the capital Ankara’s 28.3% and Istanbul’s 20.8%, according to year-on-year first-quarter data for 2020 and 2021.
The key question is however whether an increase in property prices, as good as it is for investors eyeing a more than average return, has negative implications for renters as rentals increase of course proportionally.
Hence and at the end of the investor’s day it is the same old story – rising property prices make buying initially more expensive yet ultimately promise a good return on investment as house prices are highly unlikely to decrease dramatically at any point in the medium-term future. A complete speculation-based property market is however not a healthy economic development. Having said that governments are not allowed to interfere in fully functioning market economies so it all boils down to private investors finding a sustainable middle-ground approach. The one thing governments can do though is to guarantee affordable housing with state support for lower-income segments of the population. This must include the younger generation who like anywhere else finds it hard to come up with the required minimum mortgage down payments so that they can start climbing the property ladder.
Landmark decision 2002
Turkey in the past had been a heavily protected foreign property investor market. There were specifically designated areas in a number of regions and cities for overseas home buyers (or developers alike) and to top it all off, it only worked out as long as the country from where the prospective owner originally hailed from allowed Turkish nationals to do the same at their end. Three years thereafter in 2005 those "foreign landownership zones" were canceled and seven years later in 2012, all reciprocity laws were shelved for good as well.
Since then, Turkey has established itself as a leading investment location. Initially, mostly European nationals flocked to nations on the southern and western shores with Germany and the United Kingdom. Almost two decades later, there is hardly any nation in the world that does not have an ever-growing number of its citizens acquiring property in Turkey.
What has not changed is the fact that if a foreign buyer intends to rent out their Turkish property it must be registered so that taxes can be paid on renting out a flat. Experience shows, however, that most owners prefer to use their homes for themselves, no surprise in a country with such perfect climate and scenery.
Back to Bodrum
Bringing potential property investors from many countries together in Turkey is the reason behind holding the Bodrum Investor Conference, or BIC. As mentioned above, this event has been initiated entirely by private citizens who are mostly British and Turkish professionals. Once again in the words of the team hosting the event – who did not want to be named in this article as they didn't want to give the impression that the event is all about personal marketing – BIC was established to connect property professionals, lawyers and bankers with each other and to bring local and international investors to Bodrum and the wider region and thus to all over Turkey. They can be contacted via its website: bodruminvestorconference.com.
In a nutshell, conference copycats are more than welcome, and we are not just talking about private home buyers but investors in the hotel sector as well and this is written knowing fully well that organizing large scale private events in a post-pandemic world is no small feat and requires precise attention to detail. It needs a lot of energy; it demands endless enthusiasm and great topical and organizational expertise to attract international guests who might still be somewhat reluctant to take to the skies again.
Mixing business with pleasure might just do the trick. Turkey is open for business; the property sector is open for business. With the Turkish economy up for a stellar post-COVID-19 annual growth rate – perhaps even reaching the magic 10% mark – one should not be surprised if 2022 will be remembered as a record year with regard to property investments both from home and abroad, too.