Turkey’s steadily growing economy, large young population, increasing number of more affluent consumers and an ongoing housing shortage are all important factors to consider when that country’s real estate sector. Turkey’s real estate investments were 1.1 billion USD in 2006, and the market is due to grow to 4 billion USD in 2007, according to the Wall Street Journal.
Istanbul has significant importance for the real estate investment boom in Turkey. Istanbul has a population of around 14 million, and with a 35% share of the Gross National Product (GNP) of Turkey it is a substantial commercial and cultural hub in the region. The city physically represents only 0.7% of the Turkey’s total surface area and yet Istanbul has 31% of the country’s total housing stock. Istanbul recently topped an Urban Land Institute / PWC survey for the best development prospects, leaving behind 26 significant markets including Moscow, London and Barcelona.
Due to high population growth and increasing urbanisation rates, the demand for residential housing is climbing rapidly, and shows no signs of a slowdown in the near future. The Turkish construction sector has registered quarterly average growth rates of 21.2% since 2005, a figure which is substantially above the GDP growth of the country. The construction boom helped the housing gap to decline significantly, however there is still a deficit of 150,000 units per year. Prices have risen 100 per cent in two years in Istanbul. Buying an apartment flat cost EUR2,500 per m2 in the city centre and EUR2,000 per m2 in the satellite towns around the city. Istanbul property is expected to generate on average 8% rental yields and 12.5% capital growth annually.
Most of the recent Istanbul city developments have been of mixed-use – consisting of a combination of shopping centres, office buildings, luxurious city residential apartments and hotels targeting the upper and international market. Apartment flats for this type of upper market apartments and villas range from EUR2.500 per m2 to EUR6,000 per m2.
The 179 apartments located in the flagship Kanyon shopping/residential complex – completed in 2006 – are the latest example of a mixed-use project on a grand scale. The one-bedroom flat resale value is now EUR350,000 – double their original price. Kanyon is an open-air emporium shopping area replicating a natural canyon in form, creating natural cooling air flow. This is a complex that includes a four-level shopping centre, 26-story office building and nine-screen cinema. It has 160 shops selling mainly luxury international products and brands such as Harvey Nichols and Hakkasan – opening its first restaurant outside London – occupy three floors.
The growing economy of Turkey and the increased income level amongst the young population is leading to more investment, especially in shopping malls. Istanbul has 39 modern shopping centres of which 22 were built after the year 2000. There are 16 more shopping malls under construction.
With this seemingly never-ending list of projects similar to Kanyon either on the drawing board or actually under construction, the real estate boom seems set to continue. Not just a city of mosques and bridges any more, Istanbul should be a serious port of call for property prospectors and investors.