ECONOMY

Istanbul property market booms

Estate agencies in Istanbul, Turkey’s largest city, are always hiring more employees to serve the huge demand for apartments and shops from foreign nationals and locals who belong to the ever-growing middle class. The Istanbul property market is booming: Within 2005, house prices rose by 85 percent, while this year that figure is expected to rise to 90 percent or even 120 percent, local estate agents estimate. The new law approved at the end of 2005 once again gave foreign nationals the right to purchase property, after a period of a several months in which this was forbidden. This law has rekindled foreigners’ interest in the housing market, particularly on the side of the city that overlooks the Bosporus and the Beyoglu neighborhood, traditionally the city’s diplomatic heart. Also, the growing disposable income of the Turkish middle class, the lack of quality houses, the revitalization of old and run-down neighborhoods and the simplification of processes for getting a mortgage all create a price rally. Yet despite the high rises of recent years, houses in Istanbul constitute an excellent investment opportunity for Europeans, with prices lower by 60 to 80 percent compared with the European average. Even greater, though, is the Europeans’ interest in getting a house by the sea, on the Aegean. British estate agents suggest that Northern Europeans are snapping up houses on the coast at an ever growing rate, with money once spent on holiday homes in destinations like Spain being redirected to Turkey. «We went from an average eight to 10 properties a week in Spain to selling one or two a month as interest has now shifted to Turkey,» David Hunter, director of Exclusive Properties International told Reuters. The high demand has brought a price rise in coastal areas, estimated at 20 percent in the last six months, while in the next 12 months a rise of 35 percent is expected. Today country house prices range between 100,000 and 210,000 euros. Notably, low-cost airline easyJet is starting direct flights from London to Istanbul this summer, upgrading Turkey as a destination for the British. The Turkish property market also attracts the interest of investment funds and foreign property development firms that focus on retail, aiming to draw tenants like department store Harvey Nichols, which will soon have a presence on the Istanbul market. Of a total of 2.33 billion euros, some 1.1 billion was in property sales. Treasury data for the first nine months of 2005 show real estate inflows rose by 13 percent annually. The Turkey bureau of international consultancy firm CB Richard Ellis suggests the yields of an investment in Turkey are higher that in Western Europe, as are risks, such as the instability of the Turkish lira. «In Western Europe yields are 5 percent for prime shopping centers, but in Turkey you are still achieving double these rates,» says the local bureau’s leader. Experts note that yields will go down soon because prices are rising at a higher rate than rents, but fat capital gains are also to be made. The investment boom in the Turkish property market is linked to the start of EU accession negotiations, although investors realize Turkey may never join the bloc.