As reported by Investropa, stability should be the primary consideration when looking to invest in real estate. This stability fosters steady rental income and potential capital gains, making it crucial information for foreigners interested in purchasing property in Turkey.
As reported by Investropa, Turkey is currently considered somewhat stable as a country. The last Fragile State Index reported for Turkey is 78.1, which is deemed a decent number.
Investropa further notes that Turkey boasts a strong economy supported by a robust manufacturing industry and a diversified export market. Additionally, the country benefits from a well-developed infrastructure and demonstrates a strong commitment to democratic values, contributing to a stable political environment.
Turkey is on track for significant expansion
As advised by Investropa, before investing in real estate, it’s essential to assess the stability of the country’s economy.
According to IMF projections, Turkey is anticipated to conclude 2023 with a growth rate of 2.7%, indicating a positive trajectory for the country. Looking ahead to 2024, the projected growth rate stands at 3.6%.
Furthermore, Investropa highlights that Turkey’s economy is expected to continue growing, with an estimated increase of 13.9% over the next five years. This growth trajectory would result in an average GDP growth rate of 2.8%.
Turkish business owners are a bit less confident when it comes to market conditions
According Investropa, understanding how Turks perceive their economy involves considering various factors beyond GDP forecasts. Fortunately, Turkey provides an official metric, the Business Confidence Index (BCI), which offers insights into business leaders’ confidence in current and future economic conditions.
The Central Bank of the Republic of Turkey reports that the Business Confidence Index stands at 9 for Turkey, indicating a relatively neutral sentiment. However, it’s crucial to note a potential negative trend: the BCI score has decreased from 12 to 9 over the past 12 months.
Investropa emphasizes that while the current BCI score provides some insight, it alone isn’t sufficient to determine whether it’s the right time to invest in property in Turkey. Further analysis of additional data points is necessary before making an informed investment decision.
Turkey is not really issuing more building permits
According to data from the Turkish Statistical Institute, the number of building permits issued by Turkish municipalities rose by 1.7% over the previous 12 months, from 701,509 to 713,196 units. While this indicates some growth in the construction sector, it’s important to note that it’s not a significant increase.
Investropa suggests that the number of building permits granted can be a valuable indicator of the property market’s future. However, in this case, the moderate increase in building permits may not necessarily reflect a strong positive stance on the property market’s future in Turkey.
Considering this, along with the potential increase in the selection of properties available in the domestic market, it’s plausible that property prices may decrease in Turkey in 2024. However, Investropa emphasizes the need to analyze additional data points before making a definitive assessment of whether it’s a good time to invest in properties in Turkey.
Exploding growth in house prices in Turkey
As outlined by Investropa, Turkey’s home prices have surged by 691.2% over the past five years, according to the Central Bank of the Republic of Turkey. This substantial increase means that a seaside villa in Bodrum, purchased for $625,000 five years ago, would now be valued at approximately $4,945,000.
Investropa notes several factors contributing to the soaring house prices in Turkey. One of the primary causes is attributed to aggressive interest-rate cuts, implemented as part of the policies of Turkey’s president, Recep Tayyip Erdogan, resulting in a significant rise in inflation. Consequently, Turks with access to adequate credit have turned to property investment as a means to safeguard their wealth. Additionally, foreign buyers, particularly Russians, have played a role in driving up prices in Istanbul and along the Mediterranean riviera.
Turkey’s population is getting a lot richer
As mentioned Investropa, when considering real estate investments, it’s crucial to take into account factors such as population growth and GDP per capita. This is because:
- A growing population signifies an increasing demand for housing, as more people require homes.
- A higher GDP per capita implies that individuals have more disposable income to spend on housing, potentially leading to an increase in property value over time.
In Turkey, the average GDP per capita has experienced a notable change, rising by 17.2% over the last 5 years. This achievement stands out compared to many other countries.
For investors looking to purchase and rent out properties, this trend bodes well. With each passing year, there will likely be an expanding pool of tenants in Turkish cities like Istanbul, Ankara, or Izmir who have sufficient funds to afford rental properties. Consequently, the demand for rentals is expected to increase in these cities in 2024.
Rental yields are interesting in Turkey
As noted by Investropa, rental yield serves as a fundamental tool for evaluating real estate investments. It represents the annual rental income generated by a property divided by its purchase price or market value. For example, if a property in Turkey is acquired for 500,000 TRY and generates an annual rental income of 30,000 TRY, the rental yield would be calculated as 6%.
A higher rental yield indicates that a property generates significant rental income relative to its purchase price. Given the stable supply of real estate and the expanding pool of affluent tenants in Turkey, rental yields may potentially increase in 2024. This suggests that investing in rental properties in Turkey could offer higher returns compared to previous years.
Turkey’s currency is currently very low
For foreign investors financing their investment using a foreign currency, the devaluation of the Turkish Lira (TRY) is a significant consideration. Over the past five years, the currency has experienced a notable devaluation, with a depreciation of approximately 38-42%.
Investropa suggests that for foreign investors, purchasing property in Turkey presents an attractive opportunity due to the current low value of the Turkish currency. The devaluation means that properties will be relatively cheaper to acquire, and any rental income generated from the property will yield higher returns when converted back into the investor’s home currency. Additionally, there is potential for the property’s value to appreciate over time as the currency regains strength. Therefore, investing in Turkish real estate offers the dual benefits of immediate affordability and potential long-term capital appreciation.
Is it a good time to buy real estate in Turkey then?
As expressed by Investropa, the year 2024 holds considerable promise for property investment in Turkey, driven by a range of compelling indicators. The nation’s trajectory toward significant expansion positions it as an attractive market for property buyers. With Turkey’s population experiencing increased wealth and the allure of interesting rental yields, property investment offers the potential for both long-term appreciation and immediate income.
Projections of sky-high inflation can serve as a unique advantage for property investors in Turkey. Real estate often functions as a hedge against inflation, potentially preserving the value of investments amidst rising prices. Additionally, Turkey’s currently low currency value presents a favorable opportunity for foreign investors looking to capitalize on currency exchange rates.
Despite neutral signals such as relative stability and moderately less confident business owners, the overall positive indicators, combined with the benefits of inflation and currency dynamics, make 2024 an opportune time for property investment in Turkey.
While the negative signal of exploding growth in house prices is noteworthy, the aforementioned factors might offer a counterbalance, presenting potential investors with a strategic entry point to navigate the Turkish property market.
Source: https://investropa.com/blogs/news/turkey-buy-property
