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					                           ANGLO – TURKISH LAW

Investment Opportunities for Overseas
         Property Investors

Not everybody may be able to afford a waterside villa on the Bosphorus, but there are
           still good bargains to be found in the Istanbul property market

Although Ankara is the official capital of Turkey, the business and commercial centre is
Istanbul. With a population of 12.5 million people, Istanbul is Turkey’s largest city. The
population of the Ankara is only 3.9 million. Istanbul now accounts for 20% of Turkey’s
population compared to only 5% in 1950. With two international airports, Istanbul
hosted more than 7 million tourists in 2008. The city covers an area in excess of 700
square miles. The Turkish stock exchange is located in the city and the Turkish central
bank is scheduled to move there from Ankara, underlying Istanbul’s status as a leading
national and regional financial centre.

The city is a major centre of affluence and wealth creation in Turkey. It is the largest
economy in Turkey. An OECD policy brief published in 2008 established that the city’s
economy accounted for nearly 27% of national GDP, 38% of Turkey’s industrial output
and generated more than 40% of national tax revenues. The city’s GDP per capita
exceeds the national average by more than 70%. In a report entitled "Largest city
economies in the world in 2005 and 2020" produced in 2007, international accountancy
firm of Pricewaterhouse Coopers predicted that Istanbul’s GDP which was $133 billion in
2005 would rise to $287 billion by 2020.

The historic Grand Bazaar dating from 1461 is the oldest surviving shopping area in
Istanbul. The first modern shopping mall in Istanbul appeared only in 1987. There are
currently 52 shopping malls in the city with a further 15 planned. The Cevahir mall
opened in 2005 comprising 343 shops on a gross area of 420,000 sqaure metres, is the
largest shopping mall in Europe.

The formula 1 grand prix race track situated on the Asian side of the city close to the
Sabiha Gökçen International airport has made Istanbul part of the formula 1 circuit.
Each year thousands of visitors come to the city for the grand prix.

The Greater Istanbul municipality has undertaken a massive programme of
infrastructure upgrading in recent years. In 2007 the municipality received a loan of
$322 million from the World Bank to help in this upgrading process. One of the results
of this programme has been the development of an integrated public transport system
which uses metrobuses, light railway system and modern technology sea transport.

Istanbul has been designated as the European Capital of Culture in 2010. When
Liverpool, a much smaller city won the award in 2008, it created £2 billion of investment
in infrastructure, 14,000 new jobs and generated in excess of 200 million in tourism
revenues. Given Istanbul’s size and prime location as an international tourism centre,
the city is set to exceed those figures.

Possibly Istanbul’s greatest asset is its unique social and cultural blend of east and west.
Located on two continents (Europe and Asia) the city combines the traditions of the
middle east with a thriving western culture which makes the city both exciting and
comfortable to the millions of tourists visiting the city each year.

                    Istanbul, financial hub and modern metropolis

The Property Market
Istanbul is increasingly being targetted by overseas investors for both commercial and
residential property. International property developer Donald Trump is making a major
investment with his Trump Towers being constructed in the centre of the city on a site of
23,000 square metres. The development is scheduled for completion in 2010.

In 2007 the international accountancy firm of Pricewaterhouse Coopers together with
the Urban Land Institute, identified the Istanbul property market as one of the top
performers for growth and capital appreciation. Currently Istanbul ranks only after
Moscow as the leading market for real estate investment. Despite the global downturn in
property markets, the Istanbul property market continues to be bouyant. Mortgage
finance is relatively new in Turkey so that the Turkish market is not burdened with the
same degree of bad lending problems which have beset many other housing markets. It
is estimated that housing loans account for only 5% of total consumer debt in Turkey
compared with an average for EU countries of 50%.

Not only is new housing being provided to meet the needs of Istanbul’s ever increasing
population but new construction is replacing older housing built in the last fifty years.
Turkish contractors have established a record both internationally and in Turkey for high
quality construction projects. This combined with the increasing wealth of Istanbul and
its population has fuelled a demand for new housing of international quality to replace
older housing and the “shanty town” areas of Istanbul.

With an average annual population growth of 3.5% the city population currently expands
by 420,000 people each year. This creates an automatic demand for more housing. The
effect of the global financial crunch on the Istanbul property market has been
contradictory. As mentioned above, the effect of bad mortgage lending has been
minimal. In so far that house prices in Istanbul have been affected by global forces, it is
older properties located in the more traditional areas of the city that are seeing their
market value drop. Depending upon the district in the city, some estate agents are
reporting a drop of up to 30% in the sales prices of these types of property. However
prices of new and off-plan properties located in the suburbs of the city are seeing
impressive gains in terms of capital appreciation. A major off-plan development on the
European side of the city in the Büyükçekmeçe area has seen unit prices increase by as
much as 36% over the past twelve months. It is these types of property in Istanbul which
are being targetted by overseas investors.

Rental Potential
Istanbul is home to 17 universities, 7 state run and 17 private. A substantial proportion of
Turkey’s student population is therefore located in Istanbul. Many students from
wealthy families in central Turkey can afford good quality accomodation which is now
coming onstream with the recent boom in housing construction.

Due to heavy foreign investment in Turkey, increasing numbers of overseas company
executives are coming to Turkey on a short to medium term basis. There is a marked
preference amongst these people to live in rented apartments rather than hotels. This is
particularly true on the Asian side of Istanbul where there is a shortage of 5 start hotels.

Reasons To Invest in Istanbul Property
   • Competitive pricing. Relatively cheap labour costs combined with good quality
      building standards mean that Istanbul properties are very competitively priced in
      relation to alternative regional markets.
   • Low risk. The fact that modern mortgage finance has only been available in
      Turkey over the past five years means that bad lending on property has not yet
      had time to develop in the property finance sector.
   • Easy payment plans. Both on off-plan and completed property developments it is
      possible to find payment plans that can spread the cost of purchasing over a
      period typically from 12 months to 24 months. Many Turkish developers are
      flexible in arranging a payment plan to meet the needs of the individual buyer.
   • Mortgage finance. It is now possible to raise overseas mortgage finance to fund
      the purchase of properties in Turkey including Istanbul. Many overseas mortgage
      lenders are happy to lend against security taken on the property which is being
      purchased in turkey. This reflects the confidence of overseas investors in the
      Turkish property market.
   • Capital appreciation. Recent years have seen substantial capital appreciation in
      the Istanbul property market. As in most cities the rate of capital appreciation
      has not been even, property price increases have varied from development to
      development and district to district. New residential developments have however
      almost universally been a sound investment with annual increases in property
      values ranging between 20% and 40%.
   • Rental opportunities. Additional to the potential for capital appreciation there is
      also scope for rental income to supplement investment returns. The rental
      market has been discussed above.

   •   Property records transparency. The Turkish system of property registration is
       very transparent. It is easy to establish proof of ownership and title to property
       from searches made at the local Land Registry offices. Obstacles to title deed
       transfer such as court orders and debt will appear on the official register.

 Alongside the growth of a modern high tech metropolis, the allure of tradition makes
                       Istanbul a unique and fascinating city

Pricing Issues
A report issued by Global Property Guide in 2008 revealed a unique feature of the
Istanbul housing market from a pricing perspective. The report confirmed that on
average for a 120 square metre property, the average sale price of $1,867 per square
metre made Istanbul the cheapest for property prices of 40 European locations. However
on the same type properties, the average rental of $1,507 per square metre ranked the
city 28th most expensive for rents out of the same 40 locations. Relatively cheap prices
coupled with high rental income make Istanbul a favourite for overseas real estate

In terms of regional alternatives for property investors, the principal attraction is the
Dubai property market. Istanbul compares favourably both in terms of prices and price
trends. According to Colliers International, the global real estate consultancy in a report
produced in April 2009, the average price per square metre of residential property in

Dubai was $3,055. This compares very favourably with the corresponding figure for
Istanbul quoted above. Just as significantly the Dubai property market is witnessing a
sharp fall in residential property prices. The price of $3,055 per square metre for the first
quarter 2009 is down from $5,277 per square metre for the first quarter 2008. This is a
drop of 42% in Dubai property prices calculated on a year on year basis.

                 A typical residential development in Istanbul’s suburbs

The Istanbul property market offers overseas investors a very favourable combination of
investment factors. Low risk, good levels of capital appreciation and the possibility of
high rental income compare very well with other regional alternatives. Given the
comparatively low level of investment returns elsewhere, the Istanbul property market
offers good returns to the overseas investor.

Kevin Hood
Independent Legal Consultant BA (Law) – Leeds
Website :
e-mail :
May, 2009

Note : This report is intended to provide general information on the Istanbul property
market. It does not endorse any particular development or project. All information
used in this report has been taken from public sources and is believed to be accurate.


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