Turkey opens up real-estate market to foreigners
The Turkish government is on the brink of a drastic change - currently the country’s legislation is being amended to allow overseas investors to acquire high-end residential property in Turkey. Domestic buyers are unable to afford Turkey's housing stock, which is why the government decided to undertake some legal measures to change the law, which they hope will strengthen the foreign investment interest.
There is already strong interest from investors from the Middle East and former Soviet republics, particularly in Istanbul, so experts hope that this legal move would spark even greater demand. Turkey’s Association of Real Estate Investment Companies estimates the legal change will be very profitable with a boost of the Turkish residential real estate market with about $5 billion a year, which is enormous, compared with the total investment from 2005 to 2010 in the residential sector amounting to $7.3 billion.
The Turkish market is ideal for foreign investors on the macroeconomic level, with increasingly young population and high migration from the countryside to the cities that create strong demand for more than 600,000 housing units a year.
However, there are some problems as well. Most Turkish developers and property owners went into real estate to protect family wealth from high inflation and they don't use leverage. Turkey attracted some $15.9 billion of foreign investment in 2011, with foreign investment in real estate being only $2 billion, down with half a billion from 2010.
Turkey comes with higher risks associated with an emerging economy, which keeps price levels high and withholds foreign investment. Investors who have tried to profit from the expanding Turkish economy have had limited success.
Experts warn investors against going into Turkey without researching the local practices and mentality. Businessmen, who are planning to move their affairs in Turkey, should understand the idiosyncrasies of the legal system and the impact the right local partner, in terms of sourcing and completing deals, and achieving growth from asset management.
Nevertheless, the prognosis for Turkey is good, with investors not finding good opportunities in Europe, as the financial crisis forced sellers to come down in price. This has led many to seek opportunities for better and safer investment on the Turkish market.
