Property investment tips and major regions

 

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Source: The Property Investor

Whats behind the Rise in Turkey Property Investments?

Turkish Property Market has everything going for it. Recent reforms mean that Turkey is very likely to join the European Union by 2015. (This sounds a long time away, but the majority of gains in Turkish property prices should occur over the next 5 years). The only real question is whether the EU membership will go ahead as the EU commission, for the first ever time, have placed qualifications on this potential member-state’s invitation.

Turkey is a very moderate Muslim country with naturally welcoming and warm people. If you speak to anyone who has been on holiday in Turkey, you will quickly draw a picture of a nation with plenty to offer and a fine tourism industry. Turkey is a lot more than a great place to buy a holiday home in the sun. Here are some other reasons why Turkey will be one of the 5 best performing markets over the next 10 years:

  • Planned EU membership
  • Economic growth nearing those of the eastern rising stars, China & India. In 2003, GDP growth was 8%.
  • Large cheap workforce, able to compete with any competitor workforce in terms of industrial output and cost-base
  • Very inexpensive cost of housing - currently at levels not seen since in even Spain in two decades.
  • Gateway to the Middle East – Turkey will be very important economically as well as politically once an EU member
  • Still a short-haul flight away.
  • Number of flights rising; costs are falling.
  • Strong predicted growth in tourism, especially from the UK
  • Great climate and costal regions

Whilst a well established tourist destination Turkey’s property market is still relatively undeveloped. However this is set to change as the Government intends to make Turkey a major economic power with tourism growth a key part of their strategy.

Key Economic Factors

  • Excellent capital growth projections of around 25% per annum

Land prices in Turkey have risen in recent years and, in many cases, doubled. In 2005 to 2006, property prices have risen by 25–40%. Recent research shows that by comparison investments made since 1994 have yielded the following average returns:

  • Stock market - 18% (gross)
  • Turkish property - 568% (net)
  • Pension plans significant loss (net)
  • In the opinion of ‘A place in the Sun’ in the October 2004 edition of their magazine, price increases in beach areas are expected to rise initially by 50% and then over the next two to three years by 100%.

aking an average of 25% capital growth, a property purchased at GBP 60,000 with sustained growth over five years will have a market value of GBP 183,105, entailing a huge 305% return on investment.

Turkey is just entering the EU process
Turkey is currently at the very start of the long road to possible EU inclusion, meaning there are still another 5-10 years before prices rise substantially. Prior to EU membership, there are many factors yet to be discussed and many of Turkey’s issues that need to be corrected before incorporation will be seriously considered. However Turkey has some strong backers for its entry and when it does get accepted into the EU, it is reasonable to expect the price of property to rise greatly in line with a huge surge in tourism.

Many investors are purchasing in Turkey with EU inclusion as a major driving force, while looking to take advantage of the current low property prices and growing rental market.

Turkey is at the brink of a property boom
With so many indicators, many of which are outlined on this page, its clear to see that Turkey is at the beginning of a "property boom". A boom period generally indicates a time when demand for property outstrips supply. This is currently the situation in Turkey especially in the major investment areas such as Bodrum, Istanbul and Antalya.

Turkish economy is very strong with 6% GDP growth in 2005
The Turkish economy is currently very strong and undergoing much growth. After an average growth of only 2.8 % for ten years from 1993 to 2002, Turkey was able to achieve a growth rate of 5.9 % in 2003 and a substantially higher rate in 2004. Turkey now has the 22nd largest economy in the world.

Excellent value front line properties with high capital growth potential
What is really attracting interest from international property investors is the current value for money of properties in Turkey. The Turkish market still offers excellent quality properties at prices that most other locations of a similar calibre could not offer 10 years ago. These prices, combined with the outstanding expected growth and powered by strong market drivers, offer property investors a unique opportunity.

Over 25 million tourists visit Turkey each year and boost the property market
A major indication of the current state of any property market is the tourist trade. In Turkey the tourist market is expanding massively as the country gains more exposure in the international press. The possibility of it becoming an EU member country is slowly beginning to take hold. Current demand for Turkey is reflected in the 25 million tourists it attracts per annum. This translates into solid rental yields by buy-to-let investors who purchase in the best tourist locations.

Golf tourism evolving in Antalya, making golf investments more valuable
Golf has been a strong market driver in many successful property markets around the world for many years. Spain has used golf to generate a very strong secondary season with thousands of golfers flocking to its shores to play golf during a time when they can’t play their sport at home. With golf being so popular around the world many developments are now being constructed around or near golfing facilities. Turkey and namely Antalya is no different. See Golf Property in Turkey.

Turkey offers a modern infrastructure
Many emerging markets have limited infrastructure and this is always a problem that can stunt development. However Turkey has a solid and modern infrastructure that is rapidly growing in line with its economy, tourism and property markets.

Turkey is considered to be a highly dynamic country by the World Trade Organisation
Turkey is a dynamic and emerging country equipped with a network of well-developed infrastructure and a globally competitive work force. Its unique position at the crossroads of the world trade routes and its proximity to the developing energy producing areas in the Caspian and Central Asia are factors that further raise its economic potential for the coming years.

Turkey is also home to a thriving tourist industry and a fast growing property market, attracting huge international interest.

Property prices are on the increase
Land prices in Turkey are said to have doubled over the last 2 years.

“A property that cost £35,000 in 2004 but starts from about £60,000 shows that prices have increased by as much as 30% in some areas but the build quality is of a high standard and, relatively speaking, property in Turkey remains a bargain.” (The Times Online February 2005).

No capital gains tax
Turkey also offers some tax incentives that are of high interest to property investors, such as its regulations regarding capital gains tax. If you sell your property after four years, there is no capital gains tax. Property that is sold before the period is over will be charged at the standard rate of income tax (between 15% and 35%), calculated on the difference between the buying and selling price.

General economic overview
The Turkish economy is composed of a mix of industry and commerce. Along with a traditional agriculture sector that still accounts for more than 35% of employment, it has a strong and rapidly growing private sector. However, the State still plays a major role in basic industry, banking, transport, and communication.

The largest industrial sector is textiles and clothing, which accounts for one-third of industrial employment; it faces stiff competition in international markets with the end of the global quota system.

However, other sectors, notably the automotive and electronics industries, are rising in importance within Turkeys export mix. In 2004 GDP growth reached 9%. Inflation fell to 7.7% in 2005 - a 30-year low.

Turkey offers a very competitive cost of living. This is another driving factor for tourists and those looking to re-locate. Money still goes much further in the warmer Turkish environment.

A beer will cost you about €0.60 and a meal in a restaurant starts at about €8.00. (2005 Turkish Embassy information).

Summary of economic factors that make Turkey a worthwhile investment

  • High capital growth is projected.
  • The process for incorporation of Turkey into the EU has started.
  • Turkey is at the beginning of a property boom.
  • The Turkish economy is very strong and dynamic.
  • High tourist numbers are going to increase.
  • Golf tourism is being developed.
  • Turkey has a modern infrastructure.
  • After four years, there is no capital gains tax for property investors.
  • Land prices are on the increase.
  • Front-line properties with a high return on rental or resale are still available.
  • The cost of living is low.

Key Natural Factors

The varied landscape of Turkey offers investors a wide choice of areas in which to put their money. Turkey is a present-day marvel while remnants of early civilisations vie with a modern, westward-looking republic.

Beautiful beaches and a diversity of activities make it a popular and well-tested holiday destination

Turkey is known for its unique and very diverse natural features. Turquoise water laps the beaches of the Mediterranean and Aegean coasts as they bask in the hot summer sunshine. While the Black Sea coast is far less explored but wetter and richer in vegetation, at the moment this area is largely devoted to agriculture and is rarely explored by tourists.

Although Turkey is expanding to keep up with the current level of tourist growth, it has a very solid infrastructure that has kept its tourists happy for many years, making it well versed in what is required from a successful holiday destination:

Golfing at the moment is limited to the area around Antalya, but as the industry succeeds and profits are made, it is certain to expand to other areas.

The area around Belek is famous for bird watching and enthusiasts from all over the globe go to indulge their hobby there.

Yachting is another thriving tourist industry – the many small ports and islands make it an ideal destination for boats.

Sight-seeing

To know Turkey would take you a lifetime. This is country is so rich in places to go and things for tourists to see – from the hot springs at Pammukele (known as cotton castle) to the magnificent mosques of Istanbul, there is something for everyone.

Turkish summers are much longer than many other EU destinations

Turkey enjoys a variety of climates, ranging from the temperate climate of the Black Sea region, to the continental climate of the interior, then, to the Mediterranean climate of the Aegean and Mediterranean coastal regions. The coastline touching the four seas that border the country is 8333 km in length.

Good climatic factors

The climate in Turkey is second to none and this is the reason behind the success of its tourism industry. The summer is warm and very reliable, bringing sun worshippers from all over the world to its beautiful coastlines. Temperatures range from around 21°C in April to a very hot 31°C in the mid-summer months of July and August.

It is not only the outstanding weather that gives Turkey an edge over its competitors but also the sheer number of hours of sunshine it enjoys each day. In general Turkey benefits from 8 hours of sunshine in the low season (April) to a huge 12 hours in high season.

Many visitors to Turkey can find it too hot in July and August and prefer to visit in either June or September when the temperatures are still in the 80´s while continuing to enjoy around 12 hours of daily sunshine.

The large population means that Turkey has a strong internal property market

While Turkey is enjoying increasing amounts of international investment, property buyers are deciding to buy Turkish property because it has a huge advantage over these other emerging markets: With a large population of over 70 million and as the Turkish economy continues to grow, Turkish people are more in a position to purchase property, especially with the new mortgage rules allowing Turks to use finance for property purchases. With the Turkish population continuing to grow at the rate of 2% per annum, 70% of this population is under 30 years of age. New finance laws and possible inclusion into the EU mean the average Turkish citizen will be generally wealthier. The future looks bright for the domestic property market in Turkey and therefore it is equally promising for overseas investors owning property in prime locations.

Turkey Property Investment Strategies

The "Buy to Let" Market in Turkey
Turkey is a very unique market. It has so much to offer the overseas property investor at this moment in time that it is becoming ultra popular with buyers looking for a new market in which to generate substantial return on initial investment. Usually emerging markets can present a high level of risk to an investor who purchases property with the view of using a "buy to let" investment model as they are relying on the growth of tourism to provide a constant stream of visitors wishing to rent their property. In Turkey this tourism is already very present and growing at an rapid rate, meaning that there is already a substantial and growing demand for "buy to let" property.

In addition to the massive potential for lucrative holiday rentals the huge Turkish population (70 Million +) also means that there is large scope for long term rental. Because of the quality locations and build specifications of many of the best developments along the Turkish coastline many Turkish nationals are keen to purchase holiday homes here and it is estimated that if EU inclusion is granted then Turkish nationals will generally have more available funds and be in a position to purchase quality property in quality areas.

The massive volume of tourism pouring into the main Turkey resorts is also creating a demand for long term accomodation for the tourist service industry, who are re-locating to the area to service the demands of the growing numbers of tourists.

In general the "buy to let" market in Turkey is very healthy and is a major reason why Turkey appeals to investors in overseas property.

Buy to Let (Case Study)
Adam decides to purchase an investment property and he decides that the "Buy-to-Let" investment strategy is for him.

Adam has savings of around £55,000.

After careful consideration, we recommended that Adam purchases a 3 bedroom detached villa in Bodrum Yalikavak priced at £172,000.

Initially Adam paid £2,000 reservation fee to hold the property.

Next Adam paid a 30% deposit of £51,000 (after his £2,000 reservation fee already paid)

We assisted Adam with release of equity from UK property for the remaining £119,000 at a rate of 5.0% (current UK rates) over 20 years, this translates to a monthly total mortgage repayment of £785 (capital + interest) which is equal to £9,420 over 12 months.

Adam starts to rent his new property immediately and during the 4 months "High Season" he receives £2,000 per month in rental income. In Autumn and Spring, he receives 3 full months again. The rental payments on his Turkish property amount to £14,000. Adam spends c£100 per month in management fees amounting to £1,200 annually. This leaves a net rental income of £12,800 annually. This covers his total mortgage repayments and leaves a positive income of £3,380 per annum.

Adams property in Turkey was purchased in December 2005. In January 2007, the market value of the property had risen to £211,000. This is an unrealised capital appreciation of £39,000 in 12 months. In short, Adam managed to increase the value of his investment by £39,000 and earn net rental income of nearly £3,400 in 2006.

Short-Term letting v Long-Term Letting.
The final decision to be made by the "Buy to Let" Investor is which letting strategy to use. Its obvious that the highest income is made by the property owner by letting out short term during the high season. However you can off-set this against the increased overheads in constantly finding short term rental clients and the maintenance costs between clients. Long term rentals typically pay less on a month on month basis but usually require far less input from the property owner and the rental income is fixed over the course of the year. Some property owners choose to rent long term during the low season and then short term to higher paying holiday clients during the high season. The decisions to be made on your letting strategy are usually answered in part by the property you purchase. Some properties lend themselves to short term holiday makers (those in holiday resorts such as Bodrum, Fethiye etc, as classified Perfect Holiday Home in Turkey) and others to long term locals as a permanent homes such as our properties classified as Retirement Property in Turkey. Our experts will help you decide whats best and choose the property and rental strategy thats best for you.

The "Buy to Let" Strategy is not ideal for EVERY investor and it is essential that property for this strategy is chosen wisely as it needs to be a rentable property in a popular location to allow the investor to maximize income from the Investment.

The other benefit from this type of Investment is that during the time this property is being rented and earning the Investor an income and holiday home it is still appreciating in value at one of the fastest rates available. All in all the "Buy to Let" Investment model is a sound investment decision and Turkey is currently an ideal location to deploy this strategy.

Capital Appreciation Strategy
he real gains in Property Turkey is derived in terms of capital appreciation.

Case Study - Off Plan Purchase and Resale
We guided a UK based investment fund to an off-plan development in Bodrum Gumusluk. The fund reserved 3 ground floor apartments and 2 penthouses in the same block within a seafront development in October 2005. At the time the units were reserved, the developer had an off-plan promotion in place which lasted 2 months. Total purchase price amounted to £325,000. The payment terms negotiated with developer allowed 25% upfront and the remainder after block completion. The upfront amount paid was £81,250.

We ensured that the investment fund reserved their units within the latest completion stage of the development containing 145 units in total. We knew that this particular development would prove very popular amongst second home buyers and would sell out pretty quickly.

In November 2006, all 5 units were sold by the investment fund to clients referred by us. The sales value amounted to £409,000. The completion date of the development is April 2007, meaning the new buyers will pay the total purchase value latest within 1 month of completion. The investment funds total profit on sale amounted to £84,000 (£409k - £325k). Considering that initial capital outlay was only £81,250, the funds return on investment is 100% in 18 months.

The above strategy works perfectly well in emerging property markets such as Turkey. Our property category Investment Property in Turkey includes those developments that are ideal for capital appreciation.

  • Off-plan investments in Turkey can offer the investor the ability to buy at the lowest price and achieve maximum return on investment.
  • Keeping the property for a long duration allows excellent rental income opportunities. Meanwhile investors enjoy a beautiful holiday home while watching the property’s valueappreciate.

Off Plan Property in Turkey (for maximum capital appreciation)
Turkey is a tipped as an area of huge investment growth potential. Most of the investment opportunities we offer in Turkey are using off-plan property projects. Whether it is an off-plan villa, townhouse or apartment you are interested in, buying off-plan allows you the opportunity to purchase at the best possible price and allows maximum capital appreciation. You can learn how it is possible to create wealth through off-plan property investment in Turkey below.

Buying off-plan in Turkey at this time allows investors to purchase property at the lowest possible price and with the best possible finance option. It is located in areas that will attract major rental demand and high price appreciation. Our clients who purchase early on our carefully selected Turkey developments tend to earn in excess of 25% capital appreciation annually.

Investors buying property in Turkey usually look to follow the buy to let model by purchasing a Turkish property then seeking to rent to the growing numbers of tourists for high rental yields. During this period, the investor will expect the property value to continue increasing and the value of their investment to rise substantially. Currently property prices in Turkey are rising by 25-40% per annum.

Why is Turkey property cheaper if bought off-plan?
The developer of any project is always exposed to risk. They want to cap this risk as quickly as possible and limit bank loans and other debts. They do this by selling units off-plan at excellent prices as the buyers cannot see a physical property at this stage and rely on the location and artist impressions, diagrams and computer simulations.

In addition to the excellent price, the investor benefits from an excellent finance structure due to the fact that it is off-plan. The investor usually only needs to pay around 30% of the property value, in the form of a deposit. The balance is due upon completion or in various stages to completion and can in most cases be financed by a mortgage. Mortgages in Turkey will very shortly be widely available to foreign nationals. Please check our Turkey Property Finance section.

Once you have decided to invest in off-plan property in Turkey, you need to decide which strategy you will adopt to achieve your return on investment. We will help you to choose the most appropriate option and create an investment plan, be it a "Purchase and Resell" or "Buy to let" strategy.

How to Maximise Profit From an Off-Plan Property Investment in Turkey

  • Purchasing early
    For reasons mentioned above, developers will offer units well below market value. It is important to buy your off-plan property in Turkey as soon as possible as the market is in its early stages of development. Prices are still very competitive but are already undergoing steep growth curves, thus investors who purchase now will see the greatest profits.
  • Purchasing the best units
    As our investors are aware, early purchase offers them the most sought after properties on any given development. Penthouses are firm favorites while the best units always offer higher capital appreciation in the least amount of time and often demand the greatest rental incomes.
  • Price increases as development matures
    As the development begins to be constructed the unit’s value rises. There is normally a completed show home built so that buyers are taking less of a risk as they now do not need to rely entirely on plans.
  • Price appreciates as more units sell
    As more units are sold within a development, the price of the remaining units rises. This is due to the buyers being able to see current units as mentioned above. Often there is a phase payment structure which mirrors the increasing value of the properties. Obviously to the early investor this means selling the unit will attract a profit that is considerably higher at this stage than when at the time of initial deposit payment.

It is possible to make some excellent investment choices with Turkish off-plan property, we expect the current climate to continue for at least 5 more years. We specialize in helping our clients pick the best investment developments and generate personal wealth through safe and intelligent property investment in Turkey.