Turkish Property Holds Its Own

The world has been watching Turkey this week, following the recent political unrest that has seen millions of ordinary Turks take to the streets in defence of their secular constitution, ahead of the forthcoming Presidential elections. Interest in the country hasn’t been limited to politics – seasoned overseas property investors have commented on the country’s economic resilience and stability in the midst of the clash between the majority secularists and minority Islamists over the proposed, highly controversial, Presidential candidacy of current Foreign Minister and Islamist Abdullah Gul. However, property prices throughout the country have remained stable as many in the know hold the view that the economic and social reforms being so staunchly defended by protesters can only make the country as a whole an increasingly attractive investment option. The Turkish market has shown itself to be resilient in times of crisis, something that cannot be said for the fluctuating fortunes of other investment hotspots: following the 1997 coup in Turkey and resulting economic meltdown, a set of reforms were put in place and, as a result, the GDP growth rate was seen to soar to over 7% in just a few years.

In a case of perfect timing, the seventh Turkish Real Estate Summit was held in Istanbul last week. Supported by the European Public Real Estate Association (EPRA) and the National Association of Real Estate Investment Trusts (NAREIT) amongst others, the event saw hundreds of local and foreign property professionals and policy makers gather together to participate in a wide conference programme which included seminars on hot topics such as Investment Opportunities in Istanbul & Urban Regeneration, Foreign Investment in the Turkish Real Estate Industry, Opportunities in the New Mortgage System and Acquisition of Real Estate by Foreigners. On the top of everyone’s agenda was discussion of the recent introduction of HSBC’s mortgage facilities for foreign investors, a move seen by many as a long overdue necessity in the proactive drive towards encouraging overseas investment.

The service caters for purchasers of completed property only, not off-plan and allows buyers to borrow up to 75% of the property’s value over a 30 year term (for transactions in the local currency, YTL) or 50% over a 10 year term (for foreign transactions). It even guarantees no penalties for early repayment, a subject originally of much concern. The introduction of mortgages for non-residents is anticipated to result in an influx of foreigners buying homes on the Turkish coast, previously only possible as straight cash transactions. The new mortgage law applies to the local market as well and will mean big changes in the borrowing power of the domestic market as young families and others will no longer be forced to rely on family handouts or fixed rate, short-term bank loans in order to purchase a property. By being able to take advantage of new fixed rate or variable mortgages, local market action will lead to good things for foreign investors, with a drop in interest rates expected, thanks to the emergence of secondary markets throughout the country.

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