Istanbul Real Estate Market Analysis - Colliers International

  Date posted: 9th of June 2009

As the effects of the mortgage crisis which emerged in the USA have spread to the whole world and gained more global characteristics, the Turkish economy and the Turkish real estate sector in particular have also been shaken by it. Due to the current crisis conditions, which have led to economic shrinkage, a slowdown is being observed in the Istanbul residential market. Decreasing demand is putting the companies in a difficult situation. The falling house prices that began the third quarter of 2008 still continue.

 

Economists and real estate professionals have offered differing comments and interpretations regarding these falling prices. Whereas professionals in the construction sector are urging people to buy houses, as today is the most suitable time to do so, the economists are maintaining that real estate spending needs to be delayed because the uncertainty level in the market might increase even further.

While all the sectors are seeking to turn crisis into opportunity within their own possibilities, a number of developer and investor firms, which are seriously challenged by the crisis conditions, are resorting to flexible payment schemes, fixing the Turkish Lira’s exchange rate against foreign currencies, longer payment terms and other similar marketing methods in an effort to increase demand for their projects. According to our overall studies regarding A Class residential projects in Istanbul categorized by location, general price reductions have been observed in all areas since June 2008. Depending on each area’s own potential and location-related opportunities, the rate of the falling prices varies. The price reduction reaches up to 30-40% in projects located in suburban areas; however, the reduction in the central areas has remained restricted to 10-15%.


City Centre
When the effect of the economic crisis on residential prices is analyzed, it can be seen that the effects are less influential in central areas. For instance, the smallest price reductions have been noted in the Levent-Maslak area, which is a central business district. Residences located in this area - which is on the Büyükdere axis – continue to maintain both their popularity and price levels. The opportunities and privileges associated with a central location make these areas attractive.
 
Suburban Areas
The situation is slightly different in the city suburbs. The effects of the crisis on such areas have been more immense. The Çekmeköy – Ümraniye district was a highly popular development area where residential demand has been rising significantly in recent years, and many new residential projects have been developed there. While the A-class residential projects in the area comprised a total of 3,629 units in 2006, this number reached 11,279 in 2009. The excess supply now observed in this area has resulted in price reductions, resulting in a 20% fall in residential prices across the district.
 

In the Maltepe - Kartal and Pendik - Tuzla districts, situated on the Asian side alongside the Marmara Sea, the residential prices have also fallen by 20-30%. The potential of these areas is expected to expand with the completion of the Marmaray Project in 2012 and the establishment of the metro line, as part of the Marmaray Project, which will extend as far as the Sabiha Gökçen Airport. The increasing accessibility will positively affect the residential market and prices in these areas in the future.

On the European side, the Bahçesehir – Esenyurt district has witnessed an extraordinary increase in residential stock since the early 1990s. This development has today caused a major excess of supply, and prices have fallen by around 25-35% in the area following the emergence of the economic slowdown. We believe that the adverse effects of the current credit crisis on the residential market will slow down towards the second half of 2009, and the residential demand will strengthen again in the
year 2010.