Go cold turkey on UK property

  Date posted: 2nd of September 2012

If you are lured by the investment of a place in the sun, figures show Turkey is coming up trumps.  Fifty years ago, the thought of investing money in Turkish real estate over British real estate would have seemed risky.

However, with the current economic problems and uncertainty around the UK and Europe - coupled with the surge of growth in recent years in Turkey - Turkish real estate currently offers investors a secure and safe market to lay their financial trust in while real estate around Europe is left unsold and unwanted.

In the past five years, investors from around the world have been flocking to Turkey. Turkey was second only to China in 2011 for economic growth and is ranked as the 15th largest economy in the world, with major plans to break into the top ten by 2023. To say that Turkey is rife with development and growth at the moment is an understatement.

Investors have always been taken by the lure of A place in the sun - it is no doubt a dream proposition for most of us. Previous favourite locations such as Spain and Italy are crippled with widespread economic issues and property prices no longer offer sustainable growth. Investors are looking elsewhere - Turkey.

In Turkey there are currently five prime locations for investment: Istanbul, Bodrum, Fethiye, Kalkan, and Antalya. All offer a safe, secure and great return on investment on Turkish property and holiday homes.

So what exactly can you get for your money in Turkey? An average property bought in Turkey can expect to yield annual rental returns of up to 8 per cent and some come with a rental guarantee for up to 10 years. Such is the demand in Turkey that developers can offer such guarantees without risk.

Home or away
Using current market figures, if you compare the financial benefits of a holiday home in, say Kalkan, Turkey against a UK buy-to-let investment just outside of London, both bought at GBP 300,000, at the end of year five - after having five full years of benefits - both properties are sold at market value and the total profit is measured; Turkey outperforms the UK by a long way.

In short, rental income achieved in Kalkan over the five-year period outstrips UK buy-to-let averages by 41 per cent and capital appreciation in Kalkan is expected to be 268 per cent higher than UK averages.

Based on rental yield averages of a property in the UK and a property in coastal resorts of Turkey, the net rental income (after mortgage interest is serviced) on the property in Kalkan over a five-year period stands at GBP99,461, while the net rental income on the same basis on the property in the UK stands at GBP70,452.

Price predictions
In line with current GDP and growth predictions in Turkey and the UK, Turkey has an expected annual growth rate measured

as 6 per cent on average while the UK has an expected annual growth rate of about 2 per cent. By the end of year five, the Kalkan holiday home would be worth GBP414,900 while the property in the UK would be worth GBP331,203, according to the growth predictions.

Of course things can always change, predictions and averages do not always pan out - but for the time being and for the foreseeable future, Turkey is stable and secure.

Despite challenges facing European economies and the struggles afoot for investors in finding worthwhile projects, Turkey offers a booming market of opportunity - a Turkish nest egg may prove to be fruitful for years to come. Coupled with the fact that Turkey does not tax UK pensions, unlike say, Spain, the country is also exceptionally appealing for those planning to relocate to warmer climates.
 

Published by the Telegraph 2012 Business Review
Prepared by Cameron Deggin (FCCA) of Place Overseas