House prices in Turkey have remained a concern for many investors around the globe. The location of the country on the global grand scheme has made i
House prices in Turkey have remained a concern for many investors around the globe. The location of the country on the global grand scheme has made it a pivotal location for property investments. However, there are concerns that the prices may be spiralling out of control.
In 2015 house prices in Turkey rose by around 18%, faster than any other location around the world. The numbers posted for 2016 were similar at 15%. The figures were surprising to experts because of the several internal issues surrounding migration and the failed coup.
The civil wars around neighbouring Syria and Iraq, the wranglings with Russia and internal fighting were all factors that were expected to dampen the mood in terms of property prices. However, population growth and investments from Europe and the Middle East is driving a rise in property values. Is this sustainable? Will property prices continue to soar in Turkey?
Possible Reasons for a Rise in Property Value
Turkish citizenship for Property Buyers
This year, Turkey finally announced citizenship for property investors that spend at least $1m on property. This move is expected to force property prices up in key areas of the country. Julian Walker at Spot Blue says, “we are already seeing slight increases in property values in hotspots like Antalya and Istanbul. At the current rates, we could see a rise of up to 10% on property values before the end of the year.”
Political uncertainty in Europe
70% of the property investments in Europe go to the UK, France and Germany. However, Brexit reduced the attraction in these safe havens. Following the vote, London for instance, lost its place on the list of the top 15 investment spots in the world for the first time in around a decade. France’s election and the impending election in Germany also point to more uncertainty. There is also, no telling how negotiations between the UK and the rest of the EU will affect the wider EU property market. This has made Turkey an attractive destination for people that will ordinarily invest in EU property. Some experts believe that the Turkey property market will edge along positively until 2020.
Possible Reasons for a Decline in Property Value
There are some experts who believe that property prices will stagnate in the near term and crash in the long run for some reasons. The first reason is the fact major real estate developers in Turkey have financed their business with borrowed funds. Most Turkish property buyers are cash buyers that do not rely on mortgages. The few that do, rarely default on their loans. Large real estate developers in the country, on the other hand, operate on huge debt while banking on property booms near their target developments. Presently, such debt represents 20% of all corporate loans in the country with many of them turning to bad debt. The number of non-performing loans has equally doubled in the last few years.
Secondly, the political concerns that have plagued Turkey are still there. The refugee crisis and sporadic terror attacks remains a concern for cautious investors.
Experts are not offering any guarantees but all the signs point to a moderate rise in property prices across Turkey.