Buying a Property in Turkey: the Pros and Cons
There are literally thousands of articles out there Turkey's potential as a property investment destination, its strong banking system, strong stable economy, stable political system, rapidly growing economy, rapidly growing population, massive tourism growth and on an on with facts, figures and dates to support it all. But there are also downsides which are far less well covered in property investment related stories. However, if we are to present Turkey property to savvy investors in the hope that they will invest, then we must present the pros and cons and allow them to decide for themselves. Let's start with the negatives shall we?
Buying a Property in Turkey -- The Negatives:
Culturally Different is Tantamount to Backward in Some RespectsSitting astride three continents: Asia, the Middle East and Europe, Turkey has a cultural diversity that few places in the world can match -- especially in Istanbul where one side of the city is clearly European and the other side Asian. But in the main Turkey is a Muslim country and while this isn't automatically a bad thing, not all of the differences between their way of life and ours are to be smiled at.
Turkey has come on leaps and bounds in the reforms it has made in the pursuit of EU membership, but it is still very very conservative in some areas, especially the treatment of women and freedom of the press.
Journalists are regularly arrested in Turkey, and an entire newspaper staff recently resigned because the newspaper bosses signed a deal with the authorities over what news it would publish. Unfortunately even striving for EU accession has not brought much progress in this area.
Unlike women's rights and the treatment of women, where a great deal of progress has been made, especially at the central government level. However, many women are still paid less than their male counterparts and many more suffer mistreatment in the workplace, which goes unpunished by sympathetic employers -- that is sympathetic to the views of their abusers. Likewise police will often turn a blind eye to domestic violence, which is still common in Turkey. Women are beaten because their husband or their family decides their actions have brought shame on their family -- in the worst case the women are murdered and such things are accepted in society.
Developing Country:From an investor's perspective Turkey being a developing country is a good thing for many reasons, centering on the fact that it leaves a lot of room for growth and a lot of room for development, but on the downside it also means a lot of things are under-developed. Looking at the touristic areas and the areas immediately surrounding them you would never think Turkey was a developing country, but travel off the beaten track for one reason or another you will often find poor quality roads, immense traffic congestion and worse.
Unemployment is also a factor in this, Turkish unemployment fell below 10% for the first time last April, but it is still too high by western standards, and the youth unemployment especially at 17.9%. Unemployment breeds poverty and you will see a lot of poverty off the beaten track in Turkey. According to the CIA World Factbook over 17% of the Turkish population lives below the poverty line. Going hand in hand with poverty is opportunistic crime, mostly this is nothing too dastardly just unauthorised tour guides and such like in the main touristic areas, but again, if you go off the beaten track...
Welcomed like a ForeignerTurkey is renowned as one of the most welcoming places on earth, but even in Turkey foreigners are still treated very differently to the locals. This incllides higher property prices, higher rents and higher prices of everything they can get away with. For example foreigners can pay up to £20 for a meal that a local will pay £3 for.
EU Accession ProblemsMost of the nef above are really only relevant if you plan to live or holiday in your Turkish property (because most people do), but there are also negatives for the pure investor as well. For a start Turkey has many obstacles to its EU accession, with Germany and Austria strongly against its accession, and France as well until Sarkozy was replaced by Hollande in the recent presidential election, and possibly still as no one yet knows Hollande's fill stance on the matter.
Sarkozy said straight out that Turkey is culturally incompatible with the EU, and while Turkey can make waves about the discriminatory tone of such remarks, until it accepts EU member Cyprus and opens its ports to the country it can't join anyway.
Currently the EU is looking very shaky indeed as several member states fight for their financial survival and even the Euro itself is in danger of collapsing. So, EU accession may not be the must it once was, but many people still see it as the only real sign of economic and social stability, and others seek it for the freedom of visa requirements, either way Turkey's problems with gaining access to the union are certainly a consideration in the cons box for foreign investors.
Border with IraqTurkey has a border with Iraq, but this is not as simple as it sounds. Where southern Turkey meets northern Iraq there is what can be called a buffer-zone. Northern Turkey is dominated by Kurdish residents. The Kurds want this zone to be Kurdistan and are fighting for such an outcome. This often leads to violence in Turkey and Iraq and Turkey is actively working for a peaceful solution.
Buying a Property in Turkey -- The Positives:
Mounting Volume of Positive DataJust about every metric used to measure the property investment potential of a desination like Turkey is screaming invest now.
The economy is growing strongly, with 8.2% growth in 2010 and 6.6% last year making it the fastest growing economy in Europe, although growth is expected to slow this year this is as much by design as anything else.
Unemployment is falling, from 14.1% in 2009, to 12% in 2010 and under 10% in 2011 according to official data.
The population is growing rapidly in numbers and affluence, especially in the cities which provide the best job opportunities and are therefor attracting large migration from rural areas.
The banking sector is stable and strong; according to the Central Bank, mortgage lending increased by 20-25 percent in 2010 and 2011. This makes Turkey stand out as a strong contender, because thanks to the Basel III reform program increasing capital reserves that must be held against property, most European banks are closing lending on property. Meanwhile Turkish bank reserves are already above the new threshold thanks to the reforms the AK Party made in the wake of the 2001 financial crisis and so Turkey continues to lend for proeprty purchases as normal.
Political Stability: the AK Party was re-elected for its third term in the middle of last year, and in each victory it has secured a bigger majority than it held. This shows and is because the Turkish people are incredibly happy with the way their country is being run. This makes Turkey a politically stable country.
Fiscal Stability: in 2009 Turkey let its standby agreement with the IMF lapse and is expected to have paid all its debts to the IMF by 2013. Turkish public debt is currently running at around 40% (45% in 2009, 41% in 2010) of GDP, the limit to meet the Maastricht Criteria is 60% and the EU average is about 80%. Finally, Turkey's budget deficit is around 2% of GDP. This makes Turkey one of the most fiscally stable countries in Europe, although it must bring down its current account deficit.
ReformsThe AK Party has always strived to reform Turkey, to end the military involvement in government and the ensuing fraud that was damaging the Turkish economy constantly. Since taking office it has seriously reformed the country as it has sought to join the EU. These reforms culminated in the signing of a new constitution last year, hich effectively eradicates the military's remaining power in government, and includes a lot more on equal rights for women. The AK Party was also the one that allowed foreigners to buy property in Turkey, and has recently widened this with a new law removing the recprocity.
Infrastructure DevelopmentThis is also one of the AK Party's great strengths, in fact it is spending billions of Lira, pounds and dollars of bringing the infrastructure in the country up to scratch. This program will only intensify, especially in Istanbul, as Turkey is now a candidate for the 2020 Olympic Games, Recent years have seent the construction and expansion of many roads and new marinas, including the Altinkum marin.
Low Property Prices:Despite recent growth, Turkish property prices are still among the lowest in Europe. Most foreigners go for newly built properties that are of a very good quality, therein combining high quality properties with low prices giving fantastic value for money.
Low Rate Mortgages AvailableUnlike most of the world the Turkish bank system has survived the financial crisis largely unscathed and is still lending healthllly. As a result it is still possible to get mortgages in Turkey, and rates are currently very low as well.
Strong Rental YieldsLow property prices combined with the population growing in numbers and affluence, as well as growing tourism is leading to some very good yields on Turkish property. According to the Global Property Guide 6% is the average net yield in Istanbul residential property, and agents of holiday homes report similar yields on holiday lets.
Steady Price Growth
According to Gyoder Turkish property prices are growing at around 6-8% per year. This figure would have been a negative factor during the boom, but now we know it is much better to have slow and steady growth that is sustainble, rather than scintiillating growth inflating a bubble that will inevitably pop.
EU Accession Looks to be Getting Back on TrackSince having its EU application accepted in 2005 Turkey has opened only 14 of the 35 accession negotiating chapters and has closed just one. The process has gone from a snail's pace to frozen completely as Sarkozy became French President as he stated his belief that Turkey was culturally incompatible with the EU.
But now, France has a new President and all EU members have supported a new "Positive Agenda" that will see the EU and Turkey work together to create working groups (seven at first) each focussing on one chapter and helping to bring Turkish legislation more in line with that of the EU. However, as was mentioned above, Turkey's failure to recognise and open borders to EU member Cyprus is still a massive problem, especially with Cyprus now taking over the rotaing EU Presidency.
Conclusion:As you can see, while Turkey has a lot going for it, it also has a lot of work to do before it will be as safe a place to invest in as the likes of France or Italy for example. However, many investors are looking to increase their risk appetite and Turkey is one of the hottest emerging markets in the world.
The BRIC economies have spent a decade at the curve of global economic growth, and now new groupings are tipped to take over. Turkey puts the T into two of the favourites, the MINT and CIVETS (Mexico, Indonesia, Nigeria and Turkey and Columbia, Indonesia, Vietname, Ecuador, Turkey and South Africa). Looking at Nigeria or Vietnam we can see that Turkey has the same growth potential, but is a much more stable and safe place to invest.
For almost every con there is a pro. We have given you them so that you can decide. Answer in the comments -- Have we won you over?
Liam is the director of Write About Property
Socialise with UsFollow @WriteaProperty
- Property, PR & SEO Blog
- Property Articles
- Overseas Property Articles
- UK Property Articles
- Press Releases
- Overseas Property for Sale
- SEO Copywriting
- SEO Copywriting Services
- Overseas Property Blog
- Dumfries Web Design
- The Digital Coach Co
- Small Coders
- Article Writing Services
- SIPPs Property
- Overseas Property Planet
- Overseas Property Land