All these positive factors are present in Turkey. Due to financial reforms in 2002 and tight budgetary control since the election of the Justice and Development Party (AK), Turkey has experienced low inflation and falling interest rates, which combined with a recent mortgage law, are expanding the ability to borrow for housing. There is also rapid population growth, and fast-growing tourism.
The Turkish property market offers unusual value, in the view of the Global Property Guide, because of a coincidence of factors:
Low property costs. With average per square metre prices in high-end districts of Istanbul being €2,386, Istanbul property prices are much lower than other comparable European cities.
High gross rental yields. The gross yields earned by owners who rent out their Istanbul property typically average around 6.10% and can range up to7.5%, which is significantly higher than most other European cities.
Low taxes, especially capital gains. There are zero capital gains taxes on properties held more than 5 years in Turkey
Rapid economic growth. Turkey has sound banking institutions, low public debt, excellent economic management, a focus on avoiding fiscal deficits, and a competent and clean pro-business government. These positive factors are now translating into rapid economic growth, with two quarters of above 10% GDP growth this year.
A very high proportion of Turkey’s population are young. The impact of demography on economic growth can be significant.
Falling interest rates, in the context of mortgage market reform. Housing finance take-up is rising dramatically, following the extraordinary fall in Turkish inflation and interest rates over the past 6 years.
Reasonable buy-sell costs. Total buy-sell costs (i.e., the cost of buying and then selling a property) are comparable to other locations, though there are real issues about transparency and the risks involved in the lengthy Turkish registration process.
Rapid population growth. Turkey is experiencing rapid population growth, combined with dramatically rising tourist numbers, which are drawing large numbers of internal migrants are to Istanbul and to Western Turkey’s tourist hot spots.
‘The common perception is that the housing boom is history. But perhaps we should think again,’ says Global Property Guide publisher Matthew Montagu-Pollock. ‘The housing boom didn’t occur by accident. It happened because of a specific set of conditions – a dramatic long-term drop in interest rates, and institutional reforms which expanded the mortgage markets.
‘The housing boom’s pre-conditions are repeating themselves in Turkey today. Turkey experienced a long history of inflation and monetary mismanagement, but since 2002 that history is behind it - with benefits which are clear today.’