Torcana Investment Blog

Istanbul property: The hottest market in Europe?

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I went on a fascinating scouting trip in late July this year. I hadn´t visited this country in about 5 years, so I was very keen to see how it had changed. 

This is the sixth most visited country in the world and tourism is growing at a breakneck pace. It is home to tens of millions of young and well educated people. It is the 9^th largest recipient of foreign direct investment, well ahead of more hyped up rivals such as Brazil, Mexico and Thailand. It is the 15^th largest economy in the world and the only big economy to have matched China and India´s eye watering double digit GDP growth figures last year. 

This country recovered very quickly from the financial crisis, and its banking system is extremely robust. In fact, Moody´s, Fitch and Standard & Poor have been quietly upgrading its credit rating, while generating headlines for doing the opposite to others.

In its biggest city a property boom is in evidence everywhere. Thousands of new residential and commercial towers are springing up in practically every district. This is not Dubai - there is no speculative bubble driven by foreign investors. Demand is being driven by locals who want somewhere to live. 

Real estate prices in this balmy Mediterranean climate are less than half the price of similar properties in Spain, France or Italy.

In my opinion, this is the most exciting real estate market in Europe by a mile. It is probably one of the hottest markets on the planet.

The country I am referring to is Turkey - a democratic, secular, republic with an incomparably rich and ancient cultural heritage. 

With a population of 75 million and an average age of just 28, Turkey has become a major tourist destination with almost 30 million visitors a year (more than the UK). 

It´s economy expanded by 11% between Q1 2010 and Q1 2011, the third fastest in the world. 

Turkey is a prominent member of the G20, a long standing member of NATO (2^nd only to the US in troop size) and is in full membership negotiations with the EU. 

Istanbul is one of the largest cities on earth, and with a population of over 13 million it is significantly bigger than both London & Paris. Despite its vast size, this is a magical place with an incredibly rich and exotic history, having been the centre of the Ottoman, Byzantine and Roman empires. Like Rome, Istanbul is perched on seven hills and you´ll find countless terraces and rooftops beckoning you to relax, beverage in hand, and admire the spectacular views of the harbor and famous Bosporus strait below. 

Istanbul skyline

What surprised me most on this trip wasn´t how culturally rich Istanbul was. I was fully aware of that from previous visits. I was more taken aback by how modern and cosmopolitan the city had become. 

Let me illustrate by way of example from two of Turkey´s biggest passions – shopping and sport. 

Example 1: Shopping

The main shopping street in Istanbul is called Istiklal. Picture a pedestrian version of 5^th Avenue in New York or Oxford Street in London and you´re in the same ball park. Istiklal Avenue is lined with boutiques, cafes, consulates, restaurants, cinemas, banks, churches, mosques and high end residential apartments. Young girls wearing skimpy summer skirts and t-shirts mingled freely with older generations wearing a traditional headscarf. 

I was there at 10pm on a Wednesday evening and it was packed with shoppers. When I left my restaurant at 11.30pm, the streets were still busy and the shops were still doing brisk business.

Example 2: Sport

Turkey is a football mad country and it has been playing professional football for well over 100 years (there are four professional leagues here, including a ladies one). The two most famous teams, Galatasaray and Fenerbache, are both from Istanbul. During my trip, I was fortunate enough to have been invited to join some local businessmen in their pitch side seats in Galatasaray´s brand new stadium. We watched a friendly pre season game between Galatasaray & Liverpool.

Liverpool famously won the Champions League final in Istanbul in 2005, so their supporters have fond memories of this city. Choruses of “You´ll never walk alone” were ringing out loud and clear before the kick off. Unfortunately for them, they were totally and utterly drowned out once the game started and the crowd deservedly roared their approval before, during and after a convincing 3-0 victory over the former Kings of Europe. This was a “friendly” game but the atmosphere was as exciting as any I´ve experienced in the big stadiums of Spain and England. The ticket prices are also comparable, but that didn´t seem to deter the local supporters in the slightest - the 55,000 capacity stadium was packed.

Galatasaray v Liverpool

After the game, I travelled back into the city center with their boisterous supporters using an ultra modern (and air conditioned) metro system that puts London to shame.

Turkish Real Estate Market

The purpose of my visit to Istanbul was to check out the local real estate deals. History, shopping and sport aside, the following is what I most like about Istanbul: it has a booming economy, a massive population of upwardly mobile young people, a huge gap between demand and supply, dozens of extremely large and cash rich construction groups and a host of banks keen to lend to both locals and foreigners at low interest rates and flexible terms. 

Demand for high quality rentals in Istanbul is huge and it is not unusual for rents to increase by 5-10% annually. I´ve read through independent market reports and believe investors can achieve net yields of 7-8%, with many promoters guaranteeing these rates for the first two years. 

In my view, better known real estate markets like Spain, Ireland, Italy and even the UK all look sluggish and overpriced when compared to Istanbul property. 

I visited eight different projects during my visit, most of which were located in well heeled neighborhoods to the north west of the historical city center. Some were fully complete, some were half way through their construction and others had barely started digging the foundations. 

Istanbul property: One of the completed projects I visited

Generally speaking, spacious 1-3 bedroom apartments can be purchased pre construction from just €65,000 / $90,000/ £55,000 and they would be worth significantly more on completion. Prices can be fixed in USD, GBP, EUR and Turkish Lira. A 30% deposit is placed after reservation and the remainder can be financed on completion from a range of local Turkish banks at a 6% interest rate over 15 years. 

I know of one company in particular who is expecting to disperse roughly 150 foreign mortgages in the next 6 weeks from overseas buyers. Once I verify that they were processed without any major hiccups or surprises, I´ll be getting very bullish on this market and will most likely offer a choice of several developments for investors to participate in. 

If you would like to receive detailed information packs on Turkey, Istanbul and the first projects we will release, just send an email to investments@torcana.com with Istanbul Property in the subject line and please include your name and a daytime contact number.

Kind Regards

Colin