Yes, there is no question that the real estate market in Turkey has tremendous growth potential. After all, Turkey has ranked as the world’s top performing real estate market for years on the Knight Frank’s Global Property Index. Real estate prices in Turkey have grown at between 12% and 15% over the last decade and a half, which is stunning.
Even so, keeping in mind the political situation in Turkey and the social unrest seen over the last 18 months, one has to be very careful about investing in properties for sale in Turkey.
There has been a spate of terrorist attacks in Turkey, with most of them targeted at foreign tourists. Early this year, on New Year’s Eve, 39 people were killed and 70 injured in a terrorist attack on a nightclub in the Besiktas district of Istanbul. Many of those killed were foreign tourists just looking to have a good time.
There have been a number of terrorist attacks like that in Turkey, in 2015 and 2016. One hopes that such incidents are not repeated in 2017.
Another worrying development was the attempted military coup against President Recep Tayyip Erdoğan. The military coup failed, but it gave President Erdoğan an excuse to establish an authoritarian regime in Turkey. His administration has been accused of many human rights violations by international agencies.
This has put off many foreign buyers from investing in properties in Turkey, despite the obvious advantages of the real estate market in that country. Rental yields in Istanbul are as high as 8% - this combined with long-term real estate growth, makes any investment in Turkish properties a real winner, over the long-term.
The biggest investors in Turkey right now are wealthy Arabs. There have been investments worth over $3 billion in Turkish real estate from cash rich Arab buyers over the last 12 months. This is expected to cross $10 billion a year by 2022. Clearly, there is a great fascination about Turkey in the Middle East. Turkish popular culture is responsible for this – Turkish soap operas are very popular among young people and women in the Middle East.
There is also a growing interest from China in Turkey. Over 300,000 Chinese tourists visit Turkey every year, so a lot of Chinese are familiar with Turkey and what it has to offer. The Chinese investment in Turkey is expected to pick up over the next few years.
There could be a slackening of demand for Turkish properties from British, Scandinavian and German buyers because of the political situation in the country. Even Russian buyers have been discouraged, because of the recent conflagration between the Turkish and Russian militaries.
While there many reasons to worry about investing in Turkey, it is also seen as some sophisticated high net worth investors as a wonderful long-term opportunity. They expect the political turmoil to continue only for a few years and for the situation to become normal soon. So they expect any investments in Turkey made this year to be worth a lot more in 5 or 6 years time.