The global financial crisis in 2008 had a very limited effect on Turkey – because the country had been there and done that already in 2001, when the banking sector was at the centre of the economy’s collapse. Ironically, the reforms to the banking system that followed meant Turkey was in an ideal position to deal with economic upheaval seven years later, and it has continued to go from strength to strength ever since, while elsewhere in the world attempts at recovery continue to falter. How did they do it? Here’s a brief snapshot of key events.
In 2002, the single-party government gained power and secured political and economic stability, encouraging its own people to consider investing in Turkey. Living standards began to improve and every sector experienced growth, particularly real estate; radical reforms were made and an economic structure was created that was based on the lessons Turkey had learned from the crisis. It was a great education: as the world economy has collapsed, so Turkey’s economy has grown and in 2011 was ranked 16th in the world by the International Monetary Fund (IMF) and the CIA World Factbook – a considerable improvement on its former place of 26th – and 15th in the world by the World Bank.
Between 2002 and 2007 high economic growth rates were achieved and inflation levels were stabilised. While previous governments had tried to please everybody, a singleminded approach to achieving predetermined goals and objectives resulted in the revalorisation of the lira, which stabilised the Turkish economy. By 2009 exports were £68 billion and by 2010, £72.5 billion. The main export partners in 2009 were Germany at 10 per cent; France, UK and Italy – all at six per cent; and Iraq at five per cent. However larger imports from Russia, China, US and Europe, which amounted to £103 billion in 2010, threatened the balance of trade. Since then there has been a rise in foreign investment and by 2011 the general picture of Turkey was of a country with a sound financial structure that was well grounded.
The economy in 2012
Statistics from a 2012 report prepared by PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULI), Emerging Trends in Real Estate Europe, rank Istanbul in Turkey as the most attractive investment market in Europe. No wonder – the country’s GDP was £456 billion in 2010 and grew by a further 11 per cent in the first quarter of 2011; inflation rates are predictable and prices are stable. In the first 11 months of 2012, the central bank reported that Turkey's current account deficit (CAD) fell by £15.6 billion to £28 billion – even better than projections, which were for a CAD of £36 billion.
In 2012 the Pew Research Center undertook an economic performance assessment in 21 countries in Europe and Asia. Part of the assessment included a ‘satisfaction with the economy’ survey among citizens, and while more than half the people in Germany, China and Egypt were happy about the economy, those in Greece, Spain, Italy and Pakistan were decidedly gloomy. Where did Turkey fit in? Germany and Egypt scored 53 per cent, and Spain scored 10 per cent (Greece scored only two), but Turkey returned a respectable score of 47 per cent for the happiness factor. Bearing in mind that a similar survey in 2002 saw a return for Turkey of only four per cent, this demonstrates a big improvement in the confidence of local people.
As for real estate, Cameron Deggin of international property agency, Place Overseas said in 2012 "The long awaited reciprocity law is finally upon us, the Turkish real estate market will now receive yet another mega boost." Mr. Deggin was referring to the fact that a new reciprocity law has been approved, allowing people from Azarbaijan, Iran, the Gulf region, the Middle East and other formerly restricted countries to purchase real estate. This is likely to lead to a massive influx of investors bent on finding the right property investment in Turkey.
Future projections and the real estate market
As Turkey’s economy goes from strength to strength, so the real estate market is also flourishing, with many superb investment opportunities available, and Place Overseas reports that the number of overseas property buyers is increasing year on year. Fancy a luxurious, affordable holiday home? Head for Turkey’s south coast and consider some of the fine villas in Bodrum with great sea views or think about purchasing a home in Mediterranean Antalya.
Place Overseas says: “favourable prices, exceptionally strong economic growth and Turkey's unrivalled natural beauty are all contributing factors to its popularity as a prime investment destination.”
Looking for an investment opportunity that is guaranteed to turn a profit? There is no better option than Istanbul, where demand greatly exceeds supply. The real estate market in Turkey has grown at an unprecedented rate, in part because the population is ten times what it was in the 1950s, and continues to grow year on year at a rate of about 1.35 per cent. At 60% of Turkey's population, young people under the age of 30 predominate in sharp contrast to the aging populations of Europe. As mobility increases and social patterns change, young Turkish people are looking for new, contemporary homes and also for good investment opportunities in the major cities, where they choose to live and to work. That’s a lot of local people who need a lot of property, so investing in apartments, houses and hotels in Istanbul has never been so attractive.
Add to that the increase in tourism, particularly since 2010 when Istanbul was declared a City of Culture, and it’s pretty obvious that the market for overseas buyers is actively growing. Growth rates in property values have been accelerating in defiance of the negative growths experienced in most Euro zone countries. For example, investors who have already bought into the holiday home market are enjoying exceptional rental prospects for Kalkan villas – some owners are gaining returns of up to 10 per cent.
Given all the facts, there’s no point in asking the ‘Why invest in Turkey?’ question; instead, ask yourself, ‘Why wouldn’t you?’
Carbis & Partners
17 January 2013