Turkish Mortgages boost Turkey property boom

Following news in June that Turkey’s State Minister and Deputy Prime Minister, Abdullatif Sener, will make the bill regulating the implementation of Turkey’s new mortgage system, a top priority for the 2006 parliamentary year, it is a positive step that HSBC bank along with Istanbul Mortgages set to release the first overseas mortgage product for buyers wishing to invest in Turkey. European Turkish property investors now have the ability to borrow up to 80% of the purchase price or valuation to finance the purchase of their chosen Turkish property investment over a 30 year period.

The introduction of the overseas mortgage in Turkey is a valuable asset to Turkey’s growing appeal as a popular property investment location. Fixed mortgages are looking particularity attractive. Until this month, Turkish banks only offered short-term loans, something of a sticking point with Turkish investors and holiday home buyers wishing to cash in on Turkey’s buy-to-let potential. Lack of a Turkish mortgage has had a somewhat limiting affect on the real estate in Turkey as few property buyers are able to purchase a property outright. Since 2004 when Turkey’s interest rates reached astronomical levels of 24%, rates dropped to 15% at the end of 2005. Turkey’s economic conditions have improved as result of a floating foreign exchange regime and tight monetary policy to meet International Monetary Fund targets to reduce its extremely high levels of inflation and it is now forecast to end 2006 at 10.8 percent, still well above the IMF’s 5 percent year-end target.

Inflation and political uncertainty have made Turkey vulnerable as major economies raise the cost of borrowing, and the lira fell to near 1.76 per dollar in mid-June from around 1.32 in early May. Average forecasts expect the lira to hold around current levels of 1.55 per dollar over the next three months slightly rising to 1.60 by the end of 2006.

Even so Turkey is currently experiencing strong demand for property given its large population of over 70 million of which 70% are under 30. The new mortgage offerings are not only positive for overseas buyers but also the home grown market. Investors should expect to see a dramatic rise in property construction in general apart from vacation homes as Turkey moves in line with established real estate markets in Europe. Boasting over 25 million tourists annually, the new mortgage legislation will undoubtedly boost tourism figures in turn creating new buy-to-let opportunities. Recent stats published by Holiday Rentals shows the growth in the number of rental properties owned in overseas locations, Montenegro is in top spot at 88.8 per cent followed by Slovenia (62.5 per cent), Morocco (61 per cent), Croatia (30.3 per cent) and in 5th place Turkey at 27.9 per cent.

Risks for Turkey in 2007 include elections and tensions over accession talks with the European Union notably its refusal to open ports and airports to EU member Cyprus. These uncertainties have swayed opinion as to when Turkey would join the EU from 2014 to never.  The EU has threatened to halt accession talks if Ankara does not make progress on economic and political reforms and meet its conditions over Cyprus, and is due to report on progress in late October or early November.

On the other hand, there are very positive signs in the air with prices already reflecting expectations that Turkey would complete its remaining IMF objectives thus securing vital funds. Furthermore, Turkey is now very much on the international investors radar who track where the major players are investing, Morgan Stanley in particular are active in emerging markets and a quick look at their site reveals large investments into both Turkey and India. Turkey’s investment potential has just been boosted by an announcement from Easyjet at the start of August of a new route flying from London Luton to Istanbul. Luchtzak Aviation also reports that no-frills airlines Wizz Air and Sky Europe are aiming to start flights to Istanbul later this year if successful they will join Easyjet, Germanwings and Pegasus Airlines as carriers that operate scheduled flights to the Turkish Sabiha Gokcen International Airport hub.

Property speculators believe Turkey is on the brink of a property boom, attracted by stunning scenery, wide coastal expanses and a rich tapestry of culture have made it a major tourist draw it seems there has never been a better time to buy into this growing property investment market.

Read on for news of a brand new five star development Turquoise Tuzla.

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