User:Michael Sutton WAP/Buying Property in Turkey
Turkish property is very popular with foreign property buyers from around the world. It was popular before the international downturn [1], but has arguably become even more popular in its aftermath [2].
However, Turkey has always tended to be more popular with holiday home buyers, while investors favoured other countries. Now, a number of converging factors are increasing the appeal of Turkish property to international investors, which is increasing its overall popularity.
Years of Reform Paying Off[edit]
1980 - 2002[edit]
Since the 1980 Coup, Turkey has been reformed into a staunchly secular and democratic nation -- this is particularly noteworthy because Turkey is a majority-Muslim country.
When the current government of Prime Minister Recep Tayyip Erdogan was elected in 2002, despite the reforms, corruption was still high, and the military still involved deeply in government. Things like sweet deals and contracts going to the relatives of high ranking members of the military were a thorn in the side of the Turkish democracy, and also made the economy unstable .
Anger at this, and misery caused by the 2001 Turkish economic crisis, are thought to have been a main reason for the Freedom and Justice (AK) Party being elected. Before becoming Prime Minister, Erdogan, as Mayor of Istanbul successfully paid off most of the province's $2 billion in debt.
2002 - Present Day[edit]
Since coming to power in 2002, Erdogan's AK party has intensified Turkish reform, including major anti-corruption laws [3], which included several pro-EU reforms like giving EU courts supremacy in Turkey. The main thing now making Turkish property more popular though, is the way Erdogan has turned the Turkish economy from an unstable mess with high inflation, to a solid, stable economy with strong growth, high liquidity and a strong fiscal base.
When the AK party took power in 2002, the country was in an economic mess, following the Turkish economic crisis of 2001 [citation needed]. Since then the party has completely turned the economy around, including:
Reducing Turkey's debt to the International Monetary Fund from $23.5 billion to $7 billion [4]
Increasing Central Bank reserves from $26.5 billion to $72.5 billion [4]
Reducing public debt from 74% of GDP to 39% of GDP [4]
Reducing inflation from 34.9% to 5.7% the lowest level in 39 years. [4]
High Liquidity in a Credit Starved World[edit]
Because of the reforms made to the Turkish banking system in the wake of the 2001 economic crisis [5]; reforms specifically aimed at making the banks more resilient to economic crises, the Turkish banking system was less exposed to the effects of the global financial crisis.
So while liquidity is constrained in most countries in Europe and around the world, liquidity is high in Turkey [6], and lending is loose, especially compared to the tightened credit in the UK [7], Europe [8], the US [9] and those countries worst affected by the global downturn.
The European Sovereign Debt Crisis[edit]
The Removal of Many Competitors[edit]
Many of Turkey's biggest competitors during the boom years, are now caught up in the sovereign debt crisis.
Greece, Portugal and Italy were all competing for the attention and euros of overseas property buyers. Now, they have massive budget deficits of up to and over 10% (13.6% of GDP [10], 9.6 of GDP [11] and 9.3% [12] respectively as of 2009 estimates), and are facing the necessity of imposing harsh austerity measures on their respective populations.
In Greece one arm of the austerity has been to increase the taxation on property sales and ownership. Many foreign owners are currently trying to sell up, but buyers are sparse because of the high taxes exacerbating the economic situation. [13]
The Organisation for Economic Cooperation and Development has advised that Portugal impose similar high taxes on property [14].
Both Greece and Portugal have been downgraded by the ratings agencies since the sovereign debt crisis began.
In those three and the European Union as a whole growth remains sluggish as they struggle to crawl out of recession. The EU as a whole grew just 1% year on year in the second quarter of 2010 [15].
Meanwhile the Turkish budget deficit stood at around 5% in 2009 and is thought to have fallen this year [16]and gross domestic product grew 10.3% year on year in the second quarter of this year, following 11.7% growth in the first quarter, and taking overall growth to 11% for the first half of 2010 [17]. Turkey is one of the few countries in the world to have had its debt upgraded by the ratings agencies since the downturn began [18]
The strengths of Turkey are standing out against such a dire economic backdrop.
The Fading Importance of EU Accession[edit]
During the overseas property boom, impending EU accession came to be seen as an investment gold-rush.
Based on the fact that almost all of the countries acceded to the EU in 2004 saw rapid property price growth; investors were keen to get in on the next wave of applicants.[citation needed]
Turkey became an official applicant country in 2005, but its accession has always been opposed by France and Germany, both waving an unofficial veto, while offering a "privileged partnership" (see also: Accession_of_Turkey_to_the_European_Union)
Thus, Turkey lost out, first to Bulgaria and Romania, which joined the bloc in 2007, and then to Ukraine, Montenegro and Albania, which had seemingly more straightforward paths to EU membership.[citation needed]
Now, with the EU struggling to grow, and embroiled in the sovereign debt crisis. Turkey, with its stable economy and strong growth is standing out as the best investment choice with or without EU membership.
But that isn't a new thing, or entirely caused by the sovereign debt crisis. In fact EU membership became less and less necessary for Turkey throughout 2009, as Turkey shored up its relations with its allies and formed new alliances throughout the developed and emerging world.
During the last 18 months Turkey has signed 12 free trade agreements [19]. On top of that Turkey entered a "strategic alliance" with Brazil [20], and reached visa-free travel deals with Russia [21], Serbia [22], Sudan [23], Libya, Syria, Lebanon and Jordan [24]
The well respected publication Global Property Guide recently published a report titled Turkey: Europe's Best Residential Property Investment? [4] This was accompanied by an article titled Turkey: a Housing Boom Ready to Roll? Both detailed how Turkey property, currently among the lowest priced in the world is undervalued and presenting good investment opportunities. [25].
External Links[edit]
Antalya based Turkish real estate agent
Turkish government investment portal
References[edit]
- ^ Turkey's 'new' era enticing foreign buyers
- ^ Why is Turkish Property So Hot Right Now?
- ^ Anti-Corruption Legislation In Turkish Law
- ^ a b c d e Turkey: Europe's Best Residential Property Investment? Global Property Guide (register to download)
- ^ Moral hazard, corporate governance, and bank failure: evidence from the 2000-2001 Turkish crises (page 9)
- ^ Turkish lira gains value, PM says at ‘satisfactory’ level
- ^ Bank of England warns of tougher curbs on mortgage lending
- ^ Euro-Area Banks Tighten Credit Standards on Companies, Consumers, ECB Says
- ^ Bad loans, tight credit endanger U.S. recovery - The Globe and Mail
- ^ Greece's budget deficit worse than predicted - European Voice
- ^ Spain posts 2009 budget deficit of 9.49% of GDP - France24
- ^ Portugal Budget Deficit Hits 9.3% of GDP In '09'
- ^ New real estate taxes in Greece putting off buyers at top end of market, experts claim - Property Wire
- ^ Portugal told to consider tax rises - Financial Times
- ^ Eurostat second estimates for second quarter
- ^ Turkey’s Budget Deficit Narrows on Jump in Revenue (Update1) - BusinessWeek
- ^ Turkstat Q2 GDP by Production Approach
- ^ Turkey Upgraded 2 Levels to BB+ by Fitch; Bonds Rally (Update2) - Bloomberg
- ^ [1]
- ^ Turkey, Brazil cement strategic partnership with focus on trade
- ^ Visa-free travel to boost Russian tourist numbers to Turkey - Hurriyet
- ^ Serbia abolishes visa requirements for Turkey, says official - Hurriyet Daily News and Economic Review
- ^ Sudan lifting visa requirements for Turkish citizens to boost trade
- ^ Visa-free Middle East to boost tourism between Lebanon, Turkey - Hurriyet
- ^ Turkey a Housing Boom Ready to Roll (Global Property Guide)